First Mortgage Foreclosure vs Second Mortgage Foreclosure

Getting a home and paying for a home mortgage is a large step for any homeowner.  Often, by the time you’ve finished paying off the loan, you’ll have paid double or more with the interest included.  If the borrower fails to make the scheduled payments on time, they will risk losing their home to bank foreclosure which is a lose-lose situation both the lender and the borrower.  Whether it be the 1st or 2nd mortgage that has defaulted, it is a headache for everyone involved.  No banks like having an REO on their record and borrowers do not want to lose their home.

In addition to losing their home, they will have a poor credit rating for many years, which can make it difficult for them to get credit in the near future.

If a borrower cannot make payment on the loans and the loan goes into the 1st and 2nd mortgage foreclosure, the first lender will get money before the 2nd mortgage.  If there is a 2nd mortgage foreclosure but not a 1st mortgage foreclosure, the 2nd may end up being allowed to make payments to the 1st lender mortgage holder.