Duty of Second Mortgage Holder To First Holder

[lulumint]

What is the name of your state? New York

My home has a first and second mortgage holder. The holder of the second mortgage has filed suit to foreclose. The holder of the first mortgage is owed approximately $190,000.00, while the holder of the second mortgage is only owed $22,900.00.

1. Does the second mortgage holder have an affirmative duty to contact the first holder and notify it of its intention to sue?

2. Can the holder of the second mortgage even file suit prior to the holder of the first mortgage?

3. Can the holder of the first mortgage stop the proposed suit by the second mortgage holder?

4. Please provide any other pertinent advice on this subject.

Thanks.

[FlyingRon]

Originally Posted by lulumint

1. Does the second mortgage holder have an affirmative duty to contact the first holder and notify it of its intention to sue?

The foreclosure suit has to list all the lien holders as defendants. They will definitely get notice.

2. Can the holder of the second mortgage even file suit prior to the holder of the first mortgage?

Absolutely. They just need to realize that they're in line behind the senior liens when it comes to distributing the foreclosure procedes.

3. Can the holder of the first mortgage stop the proposed suit by the second mortgage holder?

Not by law. They could always buy the debt I guess (though I'm not sure I've ever seen that happen).

[LindaP777]

What I have seen is the second mortage holder, if they foreclose, must cover the 1st and second mortgages if they buy the house at the sheriff's sale. A lot of market values won't cover a second mortgage, so they are SOL in most cases.

[FlyingRon]

Right, it would be silly of them to foreclose as the second if the money doesn't clear the first. They then have to ask if they want to go REO on it or hope someone bids high enough that they net something.