Our office has received a rising number of calls from clients who took on second mortgages and liens years ago and then stopped hearing from their mortgage companies for many years. All of a sudden, those banks came out of the woodwork and some have been placing customers into collections for missing payments during the years in which they were not receiving any communications from the bank. 

Some borrowers even received 1099 forms from the second mortgage banks and thought that those debts had been forgiven, only to find out recently that the lien was still on their house. Unfortunately, second mortgage liens are secured debts that are attached to the title of the property, so they can usually only be removed with full payment of the lien.

The options for handling a delinquent or defaulted second mortgage loan depend on a variety of factors: whether or not the home has equity or is ‘under-water’; how far behind the borrower may be on their payments for the loan; the credit rating of the borrower; and whether the borrower wants to sell the home or keep it. 

If you are suddenly receiving calls or letters from a second mortgage that you thought was dead and gone, don’t wait until you are in default or foreclosure before taking action to learn about your rights and options.