What is interesting is it sounds like the 2nd took possession through foreclosure and then failed to make the 1st solvent and will in turn have the first lien foreclosed losing their interest.

I suspect a judge will say tough cookies to the 2nd holder for any recourse since the 2nd failed to liquidate the property in a prompt fashion there by potentially rectifying any short fall. Essentially, the 2nd’s interest may get liquidated if they let the first foreclose.

In this case… or just about any situation where there exists a 1st and a 2nd or HELOC… the 2TD/HELOC is fully subordinate to the 1st. There would be no way that the holder of the 2nd/HELOC could sell the property independent of the 1st LH, making the holder of the 1st whole again in the process, as the outstanding lein from the 1st would show up all over any title report on the property. No insurance company would insure the title, and no bank would lend to purchase the property with the 1st lein outstanding. And the 1st TD lein is not going anywhere until they either get their money or they forclose and take posession of the property.

In the world of leinholders, the 2nd/HELOC folks really are the guys bent over the cash registers, and the holder of the 2nd/HELOC foreclosing would serve no other purpose other than puting themselves in a better position to light a fire inder the 1st leinholder in hopes of getting the house to market and sold quickly, as they sit there and watch their money evaporate as prices fall.