Hello, recently my mom had her home foreclosed a year ago and the house was foreclosed by the first mortgage. When the home was auctioned it was sold for 100,000 less than what we bought it for therefore causing a deficiency balance. Now the second mortgage has put on my moms credit report that she owes 100,000 dollars. We don't money to pay that and also i believe the second and first loan were both purchase money loans. The second loan was obtained to pay for the escrow and closing costs but I am not sure if that's purchase money. But, now we want to fix this but we don't know how. When the house foreclosed we thought everything was solved but it turns out the second mortgage didn't file foreclosure and still wants there share. The house is not in our possesion anymore and it has new owners since last year in November. Please help.
1 Answer from Attorneys
What kind of loan is the second? Is it a HELOC or mortgage? There is a difference in how each can be pursued.
If it is a HELOC, the lender can pursue the balance of the loan from your mother. The only way to end the bank's efforts is to file for bankruptcy protection. This will not only stop the collections but also end the possibility of having to pay taxes on the outstanding debt if it is ever forgiven by the bank.
I have advised many clients in your mother's position and bankruptcy is the only option.