Foreclosure and second mortgage question

[czoo]

What is the name of your state (only U.S. law)? MI

We have a first and second mortgage on our home. If the first mortgage company forecloses on the home, what will happen to the second mortgage? What options will the second mortgage company have for collection of the debt once we no longer own the home? Also, if we were to buy another house for cash, would either mortgage company be able to impose a lien on the new house?

Thank you for any help that you can give.

 

[FlyingRon]

Anybody with a secured debt can instigate foreclosure. What happens is that the everybody's security (liens) will be wiped out. The money from the sale will be disbursed starting with the most senior lien (typically the tax man, followed by the first mortgage) and then proceeding to the junior liens if there's enough money left over.

If any of the secured lenders don't get fully satisfied they can sue for a deficiency judgement that can be perfected against your other assets.

 

[czoo]

Thank you for the information. I was told that because Michigan is recognized as an economically distressed state, the mortgage lender cannot come after the mortgagee for the amount lost. Do you know if that is true?

 

[FlyingRon]

Not true of any thing that has anything to do with economic distress. The ability to pursue a deficency depends on the type of loan documents and whether they use a judicial or non-judicial foreclosure.