GN you might want to edit your thread so you are not accused of perpetuating a lie. Junior lien holders do have the right to foreclose, that’s why they are called lien holders. The trouble is they have to pay off the first if they foreclose. Near as I can tell this rumor was started on the “The Ongoing Case-Shiller Fallacy/Shadow Inventory” thread by SDRealtor.
That story of people escaping their seconds and living happily ever after is total fabrication, pure bunk. What a surprise the realtor made up a fictitious mass occurrence to paint a rosy picture for RE and downplay the foreclosure disaster.
Go ahead and search all you want, I could not find one story of a second actually extinguishing debt. You will find that there is automatic reworks for seconds when a first is in modification, but ignoring seconds and having them go away is a fallacy and I surely hope no one listened to the realtor and decided to ignore their second, hoping it would just go away.
The second is not going away. Why would they do that when they have nothing to lose by just waiting for you to try and sell or wait until you pay down your home to the point it makes sense for THEM to foreclose, or heck just wait 30 years for the market to come back up and then throw you out.
SO the seconds have a choice, accept nothing or the Gov’s .06 cents on the dollar, or wait to get paid. The HAMP workouts are a total flop in CA because the mortgages are just too far underwater. No matter the rework terms the loan balance stays and even grows, including the second.
Ignore the second and the fees and penalties will just keep racking up. Or….If you were a lender and thought you were going to get screwed out of your money would you do everything you could to make it hard on the defaulter? Of course. If the second is looking at losing their money you can bet you will lose something too. Banks would rather lose a higher amount and maintain the order of punishment for delinquency than take a smaller loss and let you come out smelling like a rose.
This issue of seconds is not going to prevent an appreciable number of foreclosures but it may delay some a bit, ultimately it still adds to the underwater burden that factors into people walking in droves, which is exactly what they are doing.
Then there is the subject of your credit rating. Stop paying a second and it will get reported and the bank hopes one day you’ll need a loan from a brethren and have to come crawling back to make a deal on the bad debt.
