Second Mortgage Advice
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Understanding What Happens When You Default

During the real estate boom years, home prices were appreciating quickly on an annual basis, creating billions of dollars in home equity. Many consumers turned to the second mortgage or home equity line of credit (HELOC) to take cash out of their homes, whether it be for home improvements, vacations, or expensive toys like boats or recreational vehicles. As of June 2011, there is nearly $1 trillion of second mortgage debt on the books, held mainly by large banks.

After the real estate market crashed, homes in many parts of the country lost a large percentage of their value, and this created a situation where many of the second mortgages granted by lenders were now exposed, with no home equity behind them as collateral. It’s very common to see scenarios where the home value dropped below the amount owed on the first mortgage alone, leaving 100% of the second mortgage “underwater.”

An analysis published in June 2011 indicated that nearly 4 in 10 homeowners who took out second mortgages are underwater on their loans. This is about double the number of homeowners with only one mortgage who are also in a negative equity situation.

If you are experiencing financial problems associated with mortgage payments, you are not alone! In the past two years, millions of Americans have defaulted on their second mortgages or HELOCs. Reasons for default include loss of business income in the recession, extended periods of unemployment, medical crises, adjustable first mortgages, and sky-high credit card interest rates. Psychologically, it’s also very difficult to be in a negative cashflow situation and continue paying a second mortgage on a home that is at risk of foreclosure anyway.

CAUTION: Many consumers think that a second mortgage will “go away” if their home is sold in a “short sale” transaction or foreclosed on by the first lender. After all, a mortgage is backed by property, and once the property is gone, no more liability, right? Not so fast. Nearly all second mortgages or home equity lines of credit (HELOCs) are recourse loans, meaning that a deficiency liability remains after the property has been sold or taken back by the bank in foreclosure. Consumers are still liable for these deficiencies, and unresolved mortgages will continue to be a legal and credit risk for years to come.

YOUR SECOND MORTGAGE WILL NOT JUST GO AWAY BY ITSELF IF YOU SELL YOUR HOUSE SHORT OR WALK AWAY AND ALLOW FORECLOSURE. It’s crucial to your long-term financial stability that you resolve the second mortgage as well.

How To Resolve Your Second Mortgage
You need to take educated and decisive action when it comes to solving your second mortgage problem. At, we’ll analyze your financial scenario, answer your questions, and make a recommendation on whether or not settlement of a second mortgage or HELOC would be appropriate in your case. A small investment in your education will save you time and money, and help you avoid costly mistakes. Take the anxiety, uncertainty, and guesswork out of solving your second mortgage problem with a professional consultation for only $150! To get started, simply select your state and situation on our advice form here.



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Legal Items You Should Know About is owned and operated by Manchester Publishing Company, Inc. The information provided on this website is provided to assist consumers taking a do-it-yourself approach to resolution of second mortgages or liens.

We do not offer legal services or legal advice, nor do we provide third-party negotiation or loan modification services of any kind. Foreclosure and/or modification of loans, settlement of second liens, and other real-estate related transactions are complicated financial matters. We strongly advise consumers to seek the advice of a competent, local, legal professional. Consumers seeking to avoid foreclosure via the short sale method should seek the assistance of a local real estate professional who specializes in short sale transactions.

The information presented on this website is not intended to substitute for professional legal or real estate advice.