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What happens to the second mortgage when the first mortgage forecloses on house?

Orlando, FL |

My house in Florida was foreclosed on. I had an 80/20 loan (through Suntrust Mortgage) to avoid PMI. The 80% loan was “wiped out” with the foreclosure (yes, I understand they can still file a deficiency judgment). What happens to the 20% loan? It was also backed by the property. How long do they have to file a deficiency judgment on the first loan and when does the clock start (from the last payment or the actual date they sold the house)?

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Attorney answers 3

Posted

The second mortgage holder's debt is now unsecured, they can get a judgment against you for the full amount owed, and potentially garnish your wages and levy your bank accounts. I would strongly suggest seeking the assistance of a local attorney. It may be in your best interest to seek the protection of a bankruptcy. Good luck.

This is not legal advice and is not intended to create an attorney-client relationship. The post is only an opinion. You should speak to a local attorney for further information. The poster is licensed only in New York. Please visit www.friedmanlawpc.com or www.friedmanlawassociates.com for more information about our services.

Asker

Posted

Do you know how long they have to obtain a judgement against me? Indefinitely? My credit report shows the last active payment in Dec 2007. But, I'm pretty sure the actual foreclosure wasn't until 2009.

Lee Michael Friedman

Lee Michael Friedman

Posted

I am not a Florida attorney, so you would be better served by consulting with one on this particular question, as the Statute of Limitations varies by state.

Asker

Posted

Thank you.

Posted

If the final judgment is for $300,000 and the property is sold for $200,000, then the deficiency exists right then and there. The clock starts from the time of the foreclosure sale against the owner in favor of the bank and the bank has 5 years to try and collect on the deficiency judgment.

Posted

Your second mortgage lender may pursue you on the Note personally. However, for practical purposes, I have rarely seen them do this if they determine that you are insolvent.

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