The second mortgage lender does not need to get a deficiency judgment, even if the lender was also the first mortgage lender. The statute of limitations is indeed 4 years from the last date you paid or made a promise to pay. Just because they don't sue does not mean they give up their right to put this on your credit report.
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The second loan is now rightfully listed as an unsecured loan. This means it is available for discharge in a bankruptcy proceeding.
Also, just because they cannot sue for the debt does not mean they are required to remove it from your credit report. It is still owed despite them not being able to sue to collect it.Ask a similar question