2nd mortgage???

[julsmom]

Is it true that if you stop payment of the 2nd & you are underwater, can they not foreclose? Basically the first would get all the funds any how? I think I saw someone mention that & I can't find it...I am wondering if I am wasting over $500 a month on a payment to a 2nd mortgage...that I could certainly be using, esp if I have to leave this home behind...

[LadyInTheRed]

They can foreclose if they want to, but they aren't likely to unless they hold both the 1st and 2nd mortgages.

If you stop paying the 2nd, you are taking a risk. As you pay down the 1st and the value of the home slowly creeps up (hopefully), there may eventually be a time when you have enough equity to make foreclosing on the second worth it. In the mean time, penalties and interest will be added to what the 2nd lienholder will receive an any future sale. On the other hand, after you don't pay for a while, the 2nd lienholder or whoever they sell the debt to may be willing to negotiate a payoff at a fraction of the balance.

If you are stripping the 2nd and you are certain you will not have any difficulty doing that, then you should consider not paying the 2nd. The risk you take in that case is that if you don't successfully complete your Chap 13 and it is dismissed or converted to a 7, the 2nd could foreclose if you can't bring payments current and can't modify the loan.

Do not stop paying the 2nd without first consulting with an attorney who advises you to do so.

Edit: Just reread your last sentance. If the house is way underwater, the 2nd lienholder does not also hold the 1st mortgage, and you are leaving it behind anyway, your risk in stopping payments is significantly reduced. The worste that could happen is you'd have to leave a little earlier.

[LIENSTRIPPIN]

We have not paid our heloc since last August(GMAC). They are not foreclosing and have contacted us twice to settle the debt. We have not paid the 3rd mortgage since Feb. they(FLAGSTAR BANK) are more aggresive, however, no threat of foreclosure at this point- as I keep letting them know that I am planning on filing bk in 6 months. My husband works at the space center here in central Florida and his job after 30 years of service is in jeopardy. So we are trying to hold out as long as possible because it may be a chapter 7 rather than a 13 if he gets a pink slip.
Just a little brief history..purchased our house in 2005 with 80/20 used heloc to open buisness economy tanked had to close buisness. Original purchase price $230K was just appraised for $143K.