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Frequently Asked Questions




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Question 1: Can a financial institution which has a second position lien or second position mortgage initiate a foreclosure?

Answer:
Bad News. The second mortgage lender can foreclose on the property even if the first mortgage is in good standing with its lender. A second mortgage is a secured loan backed by the value of the home, just like the first mortgage. In the event of a foreclosure the first mortgage lender is paid ahead of the second mortgage lender. That's why it's called a second mortgage

If the second mortgage lender initiates foreclosure proceedings, the first mortgage lender may step up and buy out the second's interest in the property. Conversely, the second could negotiate to buy the first mortgage. From the lender's point of view this does not entail a lot of additional risk and there might be a real benefit for one lender to control both mortgages. 


If you thought you were safe by keeping up with the payments on the first mortgage while missing payments on the second, you're not. If the second has threatened or initiated foreclosure proceedings, they are well within their legal rights to do so. Legal fees and related foreclosure costs for work completed and applicable to the current default may be capitalized into the modified principal balance.


Question 2: I have paid my mortgage and all arrears except legal fees. The law firm says the foreclosure will continue unless the legal fees are paid as well. Can they do that?

Answer: Yes. Arrearages include all the past due payments as well as court costs, late fees, penalties, interest AND attorney's fees. So, if they want to, they can continue with the foreclosure unless you can negotiate something with them or pay in full.


Question 3: May a lender perform an interior inspection of a property if they have concerns about the property's condition?

Answer: Yes, the lender may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the borrower's continued ability to support the modified mortgage payment.