Many homeowners are under the assumption that their 2nd mortgage bank will not foreclose, even though the homeowner is behind in their payments.
While this would seem to be the case, and yes, a 2nd mortgage foreclosing makes no financial sense in almost all cases, it DOES happen.
I have had a few sellers come to me wanting to do a short sale and not even knowing that their 2nd mortgage is about to foreclose. The banks by law have to follow the proper notifications and time guidelines, but a lot of homeowners in default are getting so many notices and calls that the Notice of Sale often goes UN-noticed.
Sellers are often mistaken in their belief that their 2nd will TRY to collect back payments but won't actually take foreclosure action.
I've read and been told that the banks look at value, rate of return, potential resale, and a lot of other variables to determine whether or not to start the foreclosure process, but from what I've seen in the numerous short sales that I've dealt with, the banks do what they do with seemingly no rhyme or reason.
The foreclosure process is automated and generated and sent to the foreclosure attorneys when a loan reaches a certain default point. The loan goes into the foreclosure process and the file is turned over to the foreclosure attorney to have the proper notices (Notice of Default, Notice of Trustee Sale) sent out to the homeowners.
If you are in a loan modification or short sale, the bank representative SHOULD let you know of any foreclosure activity, but it's always best to ask, just to be safe. At that point, if the loan modification or short sale looks promising, the bank will contact the foreclosure attorney to put the foreclosure sale on hold, or to postpone it.
So if you have a 2nd mortgage in default and have missed payments, it's important to contact your bank and find out what's really going on.
Contact us with any questions, we're here to help!