what happens to the 2nd mortgage after foreclosure

[sadandconfus]

Just an update. I've been discharged August 2009, with both mortgages IIB per credit report. However, my so called co borrower did not file. If they come after them for the deficiency, do they come after on both mortgages. The first is about $325,000 and the second is about $45,500. The house is worth maybe $200,000-$250,000. At first I was going to keep the house, but never signed anything with reaffirming and try for loan modification. After months of work, they closed my case for no reason and now no modification, so I'm going to leave.

[StartingOver08]

Yes, if your co-borrower did not file for BK the lenders (both the first and the second) will come after the co-borrower for payment.

[sadandconfus]

Does anyone know in what form the deficiency judgement will be? Will the mortgage company just sue in court and does my coborrower have to appear in court or is that done between the judge and the mortgage company? I've seen a lawyer in my area advertise to help reduce a deficiency judgement. Actually that lawyers office represented my ex wife in our divorce case. Any help will help me relax.

[awayalways]

A deficiency judgment is just like any other money judgment. I had one property where the lender foreclosed and then sued me for the deficiency. They won that case but my BK7 wiped out the judgment.

On another property, the deficiency was only about 16K and the lender just sent me a 1099 at the end of the year. I filed IRS form 982? which took care of the tax problem and included the house in my BK so that's the end of that problem.

While you are protected with your BK I would expect that your co-borrower would be personally liable for the debt and any deficiency after foreclosure unless you sell it or negotiate some sort of settlement out of court. And if/when he receives a summons he could make an appearance but I doubt it would help his case.

[sadandconfus]

thanks for the reply. Did you have to appear in court at any point besides the BK? Since my co-borrower only source of income is social security but they own a home outright free and clear, i wonder if a chapter 13 will save their house and then payments can be made toward the deficiency. i don't think that a chapter 7 will work because their portion of the equity in their house (3 people on deed) will be around 125,000 fair market value each. any ideas?

[awayalways]

OP I have never made an appearance in court including my BK. My BK7 was only the 341 meeting with the trustee and that was all there was to it.

But I am not clear on your co-borrower(s) situation? It sounds like they each have 1/3 interest in another property that is free and clear in addition to the other property you two mortgaged together. So because your co-borrower(s) has assets, you need to check your states exemptions because any amount over that is at risk. Here in Florida we have an unlimited homestead exemption but your state may be different. Personally, if I were your co-borrower(s), I would try to reach some settlement before getting a judgment or just file bankruptcy and be done with it. I doubt they would be pushed into a BK13 with only SS as income. Sounds like a BK7 asset case to me.

[sadandconfus]

That is correct i think they each have 1/3 interest in the property. According to the deed it says tenants with rights of survivorship. The reason i say chapter 13, because i thought that if it was chapter 7, the house would have to be given up, but i guess it depends on the amount of the homestead exemption amount in maryland.