Second Mortgage Can Sue on NOTE?

[keepsmiling]

There has been a lot of discussion of junior mortgages but I don't believe I have seen it from this angle yet. You guys have lots of experience and I welcome your viewpoints.

(Background for new readers)
If you have a first mortgage on your property, the bank must go through a foreclosure first. If there is a deficiency (if your mortgage is $200,000 and it sells for or the fair market value is $150,000) they can come after you for the deficiency. Banks tend not to do this. In NJ, the owner has a 10 day right of redemption. If they bring a deficiency action against you, they must do so shortly after the sheriff sale, but it holds the redemption period open for a longer period. Most banks don't want to deal with this.

However, on a second mortgage, the bank has the option of suing on either the note or mortgage. If they sue on the mortgage, the second mortgage holder will foreclose. If the house is underwater and the second knows they will likely get nothing, then they may sue on the note, whereby they simply seek a money judgment without going through a foreclosure.

http://www.hertenburstein.com/publications/Articles/Shafron_article_11_09.pdf

(Note that although the title is about Commercial Property, the effect on residential property is also raised.)

[tobee43]

just gotta love jersey!!!

of course they are a deficiency state...and new jersey is also one of the only states that doesn't have caps on foreclosure fees and or costs...thereby, even if one wants to just do a foreclosure they are usually drawn into a bk as a result of the high costs associated with the foreclosure itself. (the deficiency itself along with what could and many times are upward of 50k-100k worth of costs and fees). and, remember there are states that cannot go after you with a deficiency....

but all of the second mortgage is really moot, unless there is a gain on the sale of the property and the first is pd in full along with all costs and fees they charged...that's why usually the seconds are SOL...but of course they can and will sue...however, if the collateral was the house...the security...i mean usually a second is secured by the house...not unsecured or secured by your savings or other person property....i still say about 99.99% of us here in this situation are going no where with the 2nds...

[keepsmiling]

This is Keepsmiling's DH. What I was talking about was more in terms of foreclosure and less about bankruptcy. If the house is underwater, instead of being simply SOL, the second can and will sue you directly on the note

[tobee43]

This is Keepsmiling's DH. What I was talking about was more in terms of foreclosure and less about bankruptcy. If the house is underwater, instead of being simply SOL, the second can and will sue you directly on the note

yes...they can....but it will do them no good unless there is any funds left after the first is pd in full.....and then all the costs and fees also need to be paid before they can pay the 2nd...and usually, perhaps not always, however, likely, in today's market it's not realistic to expect anything left after a first mortgage is pd off....but i'm sure it does happen somewhere....

it's just most likely more people walking away from an mortgage is "underwater" in it's value...

and welcome keepsmiling's dh....LOL...so you are darling and not just h...LOL!!!!

[helpmeout]

yes...they can....but it will do them no good unless there is any funds left after the first is pd in full.....and then all the costs and fees also need to be paid before they can pay the 2nd...and usually, perhaps not always, however, likely, in today's market it's not realistic to expect anything left after a first mortgage is pd off....but i'm sure it does happen somewhere....

it's just most likely more people walking away from an mortgage is "underwater" in it's value...

and welcome keepsmiling's dh....LOL...so you are darling and not just h...LOL!!!!

Uh, they can garnish your wages if you live in a state that allows garnishment. They can levy bank accounts. Go after other assets. It will do them good unless the debtor files for bankruptcy, then they can't sue for anything.

[tobee43]

Uh, they can garnish your wages if you live in a state that allows garnishment. They can levy bank accounts. Go after other assets. It will do them good unless the debtor files for bankruptcy, then they can't sue for anything.

yeah. maybe in the state of two that MAY allow it...but highly doubt it...no garnish on anything since it's secured by the property...really....

[newbie2]

It's happening here in Michigan on a regular basis now. The 2nd has no equity in the property and are suing on the note. That alone is forcing many in to making the BK decision. Please don't say it's not possible - it is, and it is happening.

[helpmeout]

yeah. maybe in the state of two that MAY allow it...but highly doubt it...no garnish on anything since it's secured by the property...really....

They can garnish, even if it was secured if the collateral did not cover the amount of the loan. Really. And more than 2 states allow garnishment.

[tobee43]

Uh, they can garnish your wages if you live in a state that allows garnishment. They can levy bank accounts. Go after other assets. It will do them good unless the debtor files for bankruptcy, then they can't sue for anything.

if the mortgage was secured by the house that's the collateral....it's gone.

however, your in jersey too...so it would not surprise me if the note has some type of clause in it!!

jersey does garnish, but it can on be max'ed up to a certain percentage of your pay....

we hated jersey so much we left after all these years...so again, a "special" clause would not surprise me at all in that state.

[tobee43]

They can garnish, even if it was secured if the collateral did not cover the amount of the loan. Really. And more than 2 states allow garnishment.

oh i do believe there are many state that allow garnishes...

i had a friend worked across the river at the NYC marshal's office....they use to GRAB even fireman's ...police....they didn't care...they GRABBED the judgment...(actually she was saying city workers were the easiest to garnish). now, i don't know if ny had a max amount...i know nj did. so yes, i agree new jersey can garnish your wages!...jur fyi....EVEN a STATE pension under certain circumstances.

[ryan]

oh i do believe there are many state that allow garnishes...

In fact MOST states allow wage garnishments. I only know of a handful that either disallow it or even restrict it.
Texas disallows it. North Carolina, PA, and South Carolina, also, and FL restricts if you are 'Head Of Household'.

Out-of-state garnishment orders may be honored in some of these states as well. ...and debts to gov agencies/child support/taxes/student loans can be garnished in all states.

[tobee43]

In fact MOST states allow wage garnishments. I only know of a handful that either disallow it or even restrict it.
Texas disallows it. North Carolina, PA, and South Carolina, also, and FL restricts if you are 'Head Of Household'.

Out-of-state garnishment orders may be honored in some of these states as well. ...and debts to gov agencies/child support/taxes/student loans can be garnished in all states.

yes REALLY scary....but i think the question here had to do with 2nd mortgages suing....now...we didn't have one at the time we did our bk...but the last one we had was secured by our house and not by anything else....so that was my only point. i'm not saying wages can't be garnished...i believe ANYTHING nowadays can happen...even IF it's NOT suppose to!

i actually think mo is so bad they can like take up to like 75% of your wages.....(i saw that somewhere) i couldn't believe it...i don't even think jersey is THAT BAD!!!

but the question here is about the 2nd...and usually, or in most cases, or....even.... historically after the first is pd, in today's market, not much is left to cover a dime on the 2nd position...so most of the time they are SOL...or if not they attempt to settle an amount...but once again i wish someone could chime in that was actually SUED and the HOLDER of the 2nd NOTE won and garnished pay...or took their auto as payment towards the debt.

[tobee43]

OH!!! and one needs to read this article...it's in reference to COMMERCIAL PROPERTY .....

[tobee43]

It's happening here in Michigan on a regular basis now. The 2nd has no equity in the property and are suing on the note. That alone is forcing many in to making the BK decision. Please don't say it's not possible - it is, and it is happening.

just a bit of clarification for you.....in nj MOST people usually simply cannot just do a foreclosure since nj is one of the only states with no caps on foreclosure fees and costs....it usually runs between 50k-100k....that fact alone usually drives people in nj to file for bk when they simply just wanted to do a foreclosure.

i am certain the way 2nd are written up today they may require other security than the house itself...personally, i would never take a second that would except or expect one to give added security to process the 2nd. it's like an oxy moron....why would a bank issue one a 2nd if the value or equity wasn't there. ...that's rhetorical as we all know what and why the banks did it.

[SunshineGal]

FL restricts if you are 'Head Of Household'.

Florida protects head of household wages 100% up to $500 per week, and if you make more, than they can only garnish if you agree in writing. However, many of the original credit agreements include the verbage, so they can in fact garnish head of household earnings.