Second Mortgage Holder Can Foreclose On Property

Q: My dad and my mom bought a house with a mortgage. My mom died, and my dad married my stepmom. They took out a second loan on the property, but then separated for awhile. During that period of time, my stepmom had my dad’s name removed from the second mortgage. The primary loan is still in my dad’s name.

My dad and stepmom got back together and quit paying on the second mortgage. My dad is on Social Security and she works for $12 an hour. They are keeping their first mortgage current.

The second mortgage lender wanted the deed to the house and they found out that my stepmom wasn’t even on the deed. It was still in my dad and late mom’s name.

Can the second mortgage lender foreclose on the property even though my parents are current on the first mortgage? And my dad is not on the loan, just my step mom, but she is not on the deed. Or will they just put a lien on the property so if they sale, the second mortgage will get what is owed to them? Thank you.

A: I’m a little confused. I’ve read your letter several times and you seem to be saying that your father is the only one on the title to the property, but the second mortgage has only your stepmom’s name.

In a normal situation, where a second lender has a loan that is backed by the property, the second lender can indeed foreclose on the property even if the owners are current on the primary loan.

The second lender has a lien against the property and can foreclose on the home. But that lender would only get title to the home subject to the loan that is in place with the first lender. These days, where properties are often worth less than the mortgage amount owed, second lenders have often been left holding an empty bag. Their liens are worthless, and they may be zero on the dollar.

The key to understanding your question is knowing who owned the home at any given period of time. There are instances where quit claim deeds are used to convey title back and forth between owners when they obtain loans. If your stepmom took out a new second loan, and she was the only owner of the property, that lender would have the rights as a lender to foreclose on the property even if your father later was placed on title again.

Your father may want to speak to a real estate attorney, who can go over his options in more detail, explain to him what has occurred and give him some advice.


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