Have you ever had those times when you were running short of cash? There was that unexpected car repair or the kids’ summer camp deposit you didn’t have in the budget. You knew something had to give that month but you weren’t sure what! When you considered the options of what you could do without or simply not pay – food, gas, car payment, mortgage – you decided you would not pay your second mortgage. You have missed a couple of payments on the second mortgage in the past and they have never said anything, so you should be fine. What can they do anyway?
You might be surprised to hear that your second mortgage, Home Equity Line of Credit (HELOC) or third mortgage, if you have one, can foreclose on your property. Unfortunately, many people have been led to believe that is not possible or that it is not legal. Do not be fooled. No different than your first mortgage, your second/third mortgage or HELOC has a lien on your home. When you obtained the second/third mortgage loan or HELOC you singed a deed of trust. That deed of trust provides them a lien on your home and gives them the option of foreclosing on your home if you fall behind on the payments.
In most cases, the second/third mortgage company or HELOC will allow you to get further behind on your mortgage payments before starting the foreclosure process. They will also work with you for a longer period of time before foreclosing, since they know they will be required to pay the balance of the first mortgage loan before they receive any money from the foreclosure. Sometimes the delay in the foreclosure process by the second/third mortgage company or HELOC can lull you into a false sense of security. Unfortunately, when they start the foreclosure process you may be so far behind on the mortgage payments with them that you have no way of catching up. At that point, you may want to consider filing a Chapter 13 bankruptcy to save your home.