Unless the foreclosure paid any secondary liens on the property, the liens would still be owed. If you sold the property you would have had to pay all the secured loans.
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The short answer is: "Yes". Had you sold your home, both loans would have to be paid off. In this case, your home went into foreclosure and the presumably the first lender took it. The second lender still has a Promissory Note from you presumably, and they also are entitled to payment unless the sale of the house in foreclosure produced funds in excess of what the first lender was owed, in which case, the second lender would get any surplus sale proceeds.
Assuming your facts: When you chose to secure your loan with your home, you allowed the creditor to collect any past due monies due from you from the pledged asset, in this case your home.
Since most homeowners have a mortgage on their home, that asset is already pledged to a creditor. When a new creditor accepts that collateral as security, they put themselves in line on the equity of the property. This line referred to as priority determines who gets whatever equity is available in a first come first serve order.
If your house was foreclosed on by the mortgage company, and assuming the mortgage company was first in line, they would first satisfy their outstanding balance, and if there were any proceeds left, they would pass that amount on to the next creditor, and the next, until all the lines have been satisfied.
If there are any proceeds left, they would be returned to you. However, in most cases, there are no proceeds left and a deficiency occurs. In these situations, the debtor would still be liable for the balance. The creditor however is now in a difficult situation, as they are now mostly likely an unsecured creditor.
Most creditors prefer security, when they were secured and are now displaced, many will attempt to improve their standing. They accomplish this by seeking a judicial lien, basically they sue you for the balance, and obtain a judgment against you. This judgment when properly recorded places them in line for any other assets you have. There are several ways that they can proceed to collect, including levy (asking the sheriff to come get enough items to cover the judgment) or garnishment (having the courts collect it from your bank accounts or pay check).
That being said there are several alternatives you may pursue, such as settling the debt with the creditor and or bankruptcy. Both alternatives are best pursued with the assistance of an attorney.
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