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What happens to the second mortgage in a short sale?


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I consider buying a house in a short sale. Do I deal with the first mortgage before the second mortgage? Do I have to deal with the second mortgage at all? I have to tell either lender about the other loan and payoff amount?


Usually, the second lien will join in the foreclosure as plaintiff, or, attend the sale and bid up to its exposure or upset price.

You have to look at the proposed short sale as a whole.
Neither lender will want to accept less, unless it is in their best financial interest to do so. The lender will make an estimate how much they can recover based on estimated value. If your short sale proposal meets or exceeds their anticipated net recovery after foreclosure, then they will probably accept your proposal.

If the first lienholder is to accept less than they are due, then the second will not get much if anything at all.

About your second question if you have to disclose payoffs to all parties - yes, the financial disbursements are made known to all parties via a HUD1 settlement statement. The lien holders typically ask for an estimated HUD1 statement for the short sale application.

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2007-03-13, 22:33:41   (updated: 2007-03-13, 22:37:06)
from United States  
I have a short sale pending where the homeowner used a bankruptcy to stop the foreclosure sale of the home. I had already sent the short sale packet to the lender weeks earlier, but ran out of time. Now that we have stop the sale of the home the lender says they can't talk w/ me until the bankruptcy has been discharged. I asked them if we discharged the bkrtcy would they grant an extension on the sale of the house until they either excepted or denied the offer. they told me they couldn't talk to me about that until I had it discharged. HELP!!!

2008-01-24, 09:42:13 from United States  
I'm a Realtor. My seller is closing on her home tomorrow. It's a short sale with a first and a second. All the paperwork is done, money is wired from the buyer and the hud is completed. The bank ( Chase) made no comment on the first loan but on the second loan the comment is that the seller is responsible for all deficiencies of the second loan.
The buyer ( an old lady with another home) want's something from Chase stating she is not responsible for the balance of the second loan. She's worried they can take her other home away from her. Can they?
Thank you,
2008-05-13, 19:27:38
anonymous from Hackensack, United States  
Question 1 concerning the bankruptcy.

You might be asking the wrong questions. The reason why no one can give you a quick answer is because there are many possible outcomes after the BK is discharged. One question is what does the filing want to do after BK and how much loan vs. market value of the house, etc. Why so many possible outcomes?

The state in are in will determine what happens after the foreclosure is discharged. For example, in TX and FL, a person filing bankruptcy does not have to give up their equity in their primary residence. That is why OJ Simpson lives in a multi-million dollar house in FL despite a civil judgment.

In some states, the filer can keep a set amount of their equity. The bank may want to sell the house less the minimum equity the filer can keep.

The filer may be able to make payments after BK when all their other debts are discharged and the bank will make a new deal with the filer, etc.

Question 2.

You should speak to a lawyer of someone who understands this stuff. Your question is not complete. I.e. does Chase also hold the second? What was negotiated with the bank frm the beginning, etc.

Bottom line is that all mortgages must be discharged. You must deal with all mortgage holders and get everyone to agree to discharge on a short sale.

Often, you can get the lender to agree to accept a note for less than the loan to discharge a second. After all, if the 1st goes through with foreclosure, the 2nd often won't get anything anyway. Something is better than nothing. You can even get the 1st to allow the 2nd to got some of their money in order for the 2nd to agree to discharge. After all, unless the seller agrees, no one get any money unless they foreclose.

Good luck.
2009-04-29, 12:38:59 from Boca Raton, United States  
if the first lien holder agrees to shortsale and second lien holder doesnt even acknowledge it...can we close and have a deficiency judgement? What might the second lien holder do? Will there be a lien on the property itself for the new owner? Or will this lien just follow the seller?
2009-05-21, 18:51:43
anonymous from United States  
We have a condo with a first and second mortgage on it both owned by Wells Fargo. The second is in the form of a HELOC. Each loan is handled by a separate department of WF. The HELOC folks are telling me that if I end up having to do a short sale or foreclose on this property, I will still have to pay it. If they charge it off for being 90 days late, they said I would have to pay that off before I could move forward with a short sale or foreclosure. Also, if I end up losing the property, the second would still be owed and that they could attach it to any other property I may have including my primary residence. Is any of this true? If I end up losing the property, what can I do about the second mortage? I was also told that if I accept a loan modification on the second, I will not be eligible to short sale the property if it came to that. Is that true? I'd appreciate your feedback. This property is in Monterey, California.
2009-06-26, 15:54:46
anonymous from United States  
Please help!!!! Im planning to do a short sale soon ,but i want some answers first.
What happens with a second mortgage (heloc) will that get discharge?
can the bank put in a lien to the other propperty i have?
2009-06-26, 15:59:17
anonymous from United States  
I am buying a short sale propperty, do i need to be aware of anything here?
2009-07-02, 11:16:55
anonymous from United States  
I took out a second mortage in 1999. THe borrowing institution was THe Money Store. In 2001, I filed bankruptcy.
I continued to pay the mortages, but I was not able to find the address of the second mortgage company because they were taken by another institution. I never heard from them, my insurance company could not find them. They do not show up in my credit report either. I was in the process of refinancing recently and they showed up in 'form b'. However, there is no one to pay the money to. The company I was going to refinance wanted to put it in the refinancing, but they had no clue who to pay it to. Is there a statue of limitation, or anything to get this loan off my 'form b' ? It does not show up in my title or anywhere else. My lawyer is clueless? I live in PA. Any advice? Thank you.
2009-12-05, 23:11:05
anonymous from United States  
My second mortgage went into charge-off for $500k. Can a lien be put on my other properties outside Hawaii?
2009-12-16, 12:44:13
anonymous from United States  

I have a second mortgage that does not accept a short sale.... can they do that???
please help.
2010-01-19, 14:26:12
short sale specialist from United States  
I work on over 30 short sales a month in New York. I am here to answer any questions you may have regarding short sales and the short sale process. I have saved 100 properties and homeowners from foreclosure. I have postponed over 2 dozed foreclosure dates. If you or someone you know is in danger of foreclosure please contact me right away. It is free of charge. Please **beware** of people that charge for modifications, short sales, or other forms of help & advise. Thank you
2010-01-20, 15:52:07   (updated: 2010-01-20, 15:54:15)
anonymous from United States  
I sold my house May of 2007 as a short sale and only the first mortage was paid not in full but the accepted the offer. The second mortage did not want to accept any type of negotiation, can they still come after me for the balance left on the second morgage?
2010-01-30, 07:16:08
anonymous from United States  
hello short sale specialist Please email me at
Im interested in speaking with you
Im also in ny
2010-02-10, 23:26:43   (updated: 2010-02-10, 23:27:56)
anonymous from United States  
I need help , I,m selling my primery home on a short sale
I have first and second mortgage my question is what would happend with the second loan can they try to callect the debt or go after my other second home
2010-02-16, 21:26:08
anonymous from Reston, United States  
I am working on a short sale of my own property to myself and in order to reduce an upside-down morgage. The thing is that my house appraised at 220,000 and my first morgage is 310,000 and I have a second morgage at 70,000. Is there any rules or regs in the short sale that requires the banks to use the second morgage as a factor in calculating the new 1st morgage? My property is in Temecula, Ca.
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