Yes, either lender can initiate a foreclosure. It is ultimately the second lien holders responsibility to protect their position behind the first by keeping the first current.

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Fri Aug 15 2008, 20:52

YES. They will pay-off the first lien (mortgage) at the auction unless someone pays them both off at the auction. If you need to sell you property no matter what your equity stance is I can help you by BUYING the property. I can close in 1-2 weeks too if you need a fast sale. Contact me if you would like to know more.

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Sun Aug 3 2008, 23:28

Absolutely. If you are in violation of any of the terms of your 2nd loan agreement they can foreclose, regardless of the condition of the 1st

Wed Jul 9 2008, 14:48

A foreclosure will wipe out all junior lienholders. This means a first mortagee who forecloses gets it without the second mortgage in place and eliminates all the mechanic's liens and other claims against the property, except, of course, taxes. Tax liens are always superior.
A peculiarity of Homeowner Associations (HOAs) is that their lien is actually superior to the first mortgage. When you don't pay your HOA dues, a foreclosure by them should wipe out your mortgage, but it doesn't.
The reason is the CCRs by the builder creating the HOA are filed prior to the sale to the first homeowner. This makes their lien superior, but the CCRs almost always include a subordination clause. A bank wouldn't lend money to buy a house with a HOA if the HOA could foreclose and wipe out their lien. So, the subordination clause says that a first lien mortgage is superior to the HOA's subordinate liens.
This always causes consternation among HOA officials because they often think they can get your property free of liens. They can't unless there was an oversight in the CCRs (HOA covenants, conditions, restrictions) that did not subordinate HOA liens to first mortgage liens.
This means your HOA, if any, can foreclose for non-payment, but receive the property subject to first mortgage and tax liens. When the first mortgagee forecloses, the HOA lien is wiped out.

Sat Jul 5 2008, 17:24

Yes but usually we see it the other way around. The first lien forecloses and that is when the second finds out. Usually the 2nd ends up with nothing in a foreclosure, so to protect their interest we are seeing more of them buy the property at the foreclosure auction.

Sat Jul 5 2008, 07:42

Yes and in the Dallas area we are seeing more lenders do this. I've also seen lately second lienholders buy the 1st lien at the foreclosure auction to protect their investment. It may have happened in the past but I never noticed until recently. Makes sense though. If someone had an 80/20 on a 200,000 house. That might mean the 20 was $40,000, so if the owner of the $40,000 note thinks they can sell the house for $190,000 now, they might be able to recover some of their investment.

Wed Jul 2 2008, 05:11

A junior lienholder can foreclose, but the property would be subject to all superior liens. Tax liens, for example, are always superior. So, when a first lienholder forecloses, he gets the property subject to any tax liens.
If a second mortgagee foreclosed for non-payment, he would own the property with the first lien still in place and have to pay it plus the taxes.
Of course as a practical matter, the second lienholder may not want the property, especially in this market. So, he would try very hard to get the mortgagor (you) to pay up before taking the drastic step of foreclosure.
The foreclosure might also trigger acceleration of your first lien note, though, making the whole balance due. You would have to read the note for the first lien to see what consequences there might be.

Wed Jul 2 2008, 01:54