Can a bank that issued a second mortgage (HELOC) foreclose on my house?

Question

I have two mortgages. The issuer of the 2nd mortgage has filed foreclosure documents. The first has not because I haven't fallen behind as much with them. On the foreclosure document itself, the 2nd bank refers to itself as "the sole, true and lawful holder of the bond..." and they refer to the county in which the house is located as "possible subordinate lienor". No where does the document make mention of the bank who holds the first mortgage. To make this even more interesting, when I call the bank holding the primary mortgage, THEY THEMSELVES cannot tell that they are the primary lien holders on my house. They keep asking me "who's holding your first?" Could it have something to do with the fact that both the first and second mortgages are HELOC accounts? Could the issuer of a second mortgage take my house right from under the issuer of the first mortgage? Thanks very much for taking a minute:)

Answer 1

Not if you do something about it. Get a loan modification and get out of that terrible loan. Email me and I will tell you more about the program. [e-mail]

Answer 2

Yes they can. But, it wouldn't make sense for them to do this unless you have more equity in the house than what you owe.

When a house is foreclosed  upon, the proceeds from the sale go to the primary lienholder (the holder of the first mortgage), then a second, third, etc. (second mortgage, tax lien, etc.). If you owe more on your home than it's worth and the second mortgage company forecloses, the holder of the first would get paid in full and there will be little left - if any - for the second mortgage holder.

What I suspect they're doing is just going far enough into the foreclosure proceedings to force a listing of the home for sale, to see where you are with regards to loan-to-value. If it's worth it to them (you owe just over or right at what the home is worth), they may proceed with the foreclosure sale. You'll also get a foreclosure on your credit report, which may be a little revenge they're exacting on you.

Answer 3

Yup, they sure can.

Anyone who has a lien against your house can foreclose on it in the event of a default...they just get paid SECOND to the first lienholder.

If they think you have the equity in the house, you bet your bottom dollar they will foreclose.

Subordinate...means lower than the one in front of it.

"sole, true, and lawful holder of the bond"...some states will call a loan document, a bond in legal language.

I would highest suggest that you get a real estate attorney NOW to find out what your options are, otherwise you'll come home from work one day and find the doors padlocked.

Answer 4

The holder of the "first" mortgage, is the lender who lent you money first.  If this HELOC was established before the other one, and didn't subordinate their title position when you got the other one, then this HELOC could be in 1st position.  I have seen this happen, when a 1st gets refi'd and not the second, and the title people forget to get the second to agree to stay in 2nd position, then the 2nd, which was recoreded earlier moves into 1st position on the title, and the "1st", since it's recorded after, ends up in 2nd position.

Here's an excerpt from a Law Site that may explain what's going on:

When the 2nd forecloses and the 1st is not foreclosing, the 2nd may wish to cure any present delinquencies and any future delinquencies to the 1st and not pay-off the 1st during the 2nd’s foreclosure until the 2nd re-sells the property. Of course, the 2nd can pay-off the 1st and have the 1st assigned to it. Nonetheless, to pay-off the 1st is much more expensive than to cure it. Curing the delinquencies and continuing to cure the delinquencies on the 1st during the 2nd’s foreclosure will be much less expensive. Most 2nd’s mortgages permit these expenditures to be added to the 2nd’s mortgage. Even if not so provided, most judges would allow it.

Such a cure sometimes presents a problem: the 1st will not accept the cure of

present delinquencies by the 2nd and will not accept ongoing cures from the 2nd during the 2nd’s foreclosure. If the foreclosure is judicial, the solution is to ask the judge to order the 1st to accept such cures. When the foreclosure is non-judicial there is no judge to order such a cure. The solution is to stop the non-judicial foreclosure and start a judicial foreclosure. It is highly probable that a judge will so order in all states, but especially, in states that statutorily allow 2nd’s to cure.( See ii in Preface). Such a judicial foreclosure would be conducted as in Part 3 below, but structured differently. If the judge will not order such cures, the 2nd must buy or payoff the 1st and foreclose itself (i.e. the 2nd as the holder of the 1st and 2nd).

So if your house is worth a whole lot more than owe, you may be in big trouble.

Answer 5

Any holder of a valid lien against your property can bring a foreclosure action.  If you have put up your property as collateral for a specific loan and you do not fulfill the terms of said agreement, they can foreclose.

Of course, the 'first' lienholder has a legal priority, but that means nothing to whether a secondary lienholder can do.