[quote=SK in CV][quote=pepsi]That is not true that there is no recourse after the auction. The 2nd lien holder get wiped out FOR THE BUYER. They can still pursue the seller for the deficiency in the court.
Google “2nd lien holder pursue recourse” and you will see many lenders are doing it. Especially for large amount.
Here is an article specifically talking about the 2nd lien holder with recourse loan:
That’s kind of right and wrong. If the foreclosure action is done by a senior lien holder and junior lien holders are wiped out, then the junior lien holder(s) have not exhaused their remedies, they can still turn the debt over to collection and/or litigate. But if it is the junior lien holder that forecloses, then they have no remedy after the auction, they’re finished.
That’s why 2nd lien holders often have some extra weight to throw around during short sale negotiations. Even if they have no equity, they can extort some amount in exchange for walking away. It’s in the best interest of both the borrower and the senior lien holder for them to agree if it avoids a trustee sale. Even if it is paid by a senior lien holder.[/quote]
Yes, that is correct, and that is why most of 2nd lien holders do not foreclose if the house is severely underwater.
I was just assuming that the 2nd was not the one that foreclosed. Was that the case ? There is less than 5% of NOT that are filed by 2nd.
When a lender forecloses, they kind of consume their legal right for their loan to accept whatever they can get from the auction.
