Can the second mortgagee on a foreclosed home loan require payment of the remaining balance due?

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Can the second mortgagee on a foreclosed home loan require payment of the remaining balance due?

We were foreclosed on our home by the primary mortgage company, the house sold at auction as scheduled per the details of that foreclosure. The secondary mortgage company has now turned the balance owed on the account to a collection company. We were told by the real estate agent who purchased our home at the auction that the secondary mortgage would go into immediate default and essentially be “written off”. Was this correct information or are we liable for the balance regardless of the foreclosure?

Asked on August 23, 2010 under Real Estate Law, Texas

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Yes, she was right: it went in to default. But n my understanding of the law, the second mortgage would not be "written" off unless there was some prior agreement with the mortgage holder or you have filed a Chapter 7 bankruptcy prior to the foreclosure and the debt had been discharged.  The second mortgage is not longer "secure" - it no longer has the house as collateral for the debt.  So they are now the same as any "unsecured" creditor such as a credit card company and they can turn you over to collection.  I would speak with a debt specialist to see what your options are here.  Good luck.


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