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Do I need a foreclosure lawyer?

Elk River, MN |

Our house was foreclosed in 2010. We had 2 mortgages, obviously the 1st mortgage is gone but we have continued to pay on the 2nd, to preserve our credit. How can we tell if the 2nd mortgage bank received funds from the 1st mortgage bank at the time of foreclosure? They reduced nothing on our loan, but I would assume they received something to release their lien on the property. They declined the offers we received through the short sale process (1 yr. on market), although they ultimately sold the property for a significantly less amount. Are we ultimately stuck paying this 2nd mortgage on a home someone else now owns?

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Attorney answers 3


The County in which the property was located will have a record of the price that was paid by the first mortgage company, and this should tell you whether there was a surplus that the second would have received. However, typically in this situation the first mortgage company only bids what it is owed at the sheriff's sale leaving nothing for the second mortgage company. Also, the second mortgage company would not have to release its lien, the foreclosure process extinguishes their lien if they chose not to redeem the property from the first mortgage company. Therefore, the debt to the second mortgage company remains, and you are liable for that debt unless you can negotiate a settlement with the second mortgage company, or discharge that debt through bankruptcy.


Ultimately, yes, you are stuck paying on the 2nd mortgage that WAS against the home that someone else now owns. The foreclosure wiped out the lien created by the 2nd mortgage. But the debt still remains, meaning that you're liable for the amount until you either pay it off, reach a settlement, or obtain relief through bankruptcy.

I would anticipate that the 2nd mortgagee received nothing in the sale. The bid is typically done by the 1st mortgagee and for the amount it claims is owed, plus costs and attorneys' fees.

Depending on the size of the 2nd mortgage debt, bankruptcy may make the most sense for you. Otherwise, you would probably be well-advised to contact them about a payoff as a settlement of the debt. Many know that if they don't take a settlement for a fraction of what is owed, the homeowner will simply file for bankruptcy so they'll want to take what they can get. That may not be the case anymore since you've paid nearly three years worth of additional payments.

I realize that you say one of your goals is to "preserve your credit." Here's why I think most people in your situation are fighting a losing battle in that regard. Lenders can find your foreclosure anyway prior to giving you a new mortgage loan for a new purchase. So even if your credit score goes up, people oftentimes can't even get a new loan for at least three years anyway. Additionally, unless you have been working with a credit repair company, I would anticipate that your credit score is very low anyway. A foreclosure, which typically follows several months of missed payments, will keep you credit score down pretty low. If your credit has been "clean" for the past 3 years, it may be much better now, but still is likely pretty low.

My firm would be happy to discuss your options related to this problem. We regularly represent homeowners in foreclosure, individuals attempting to settle debts, and individuals who may benefit from bankruptcy. This response is not intended to create an attorney-client privilege and is based only on the facts which have been presented on this forum.


Check the accounting & audit record associated with the foreclosure docket. It should have all the relevant information. There is a securitization priority, and the first lien holder (your first mortgage) is the first in line to be paid. If there is anything left, then the second, third, etc... mortgages are paid off.

Your second mortgage lender does not have the right to dictate anything to the first lien holder.