If you are behind on your second mortgage, you technically can be foreclosed upon by that second mortgage and eventually lose the home. The second mortgage might not be the one who gets paid or made whole but they can push the issue and actually do the bidding for the first mortgage company in a foreclosure action. My advice to consumers and those that are going through bankruptcy is to maintain current payments on both the first and second mortgage holders. If you fail to make either the first or the second mortgage payment, then either one of those vendors can institute a foreclosure action if you fall far enough behind.
In some cases, you can fail to make the second mortgage payment and the second mortgage company will not actually foreclose. What they will do in essence is wait until such time that you sell or transfer the house to then get paid their lien plus interest plus late fees. However, in many cases, people will lose the home to foreclosure. The first mortgage company will be made whole and the second mortgage, which is undersecured or in a junior position to the first mortgage, will receive nothing.
So it really depends upon the facts of the particular case. What is their equity in the real estate? Does the homeowner really want to pay the first and second mortgage and keep their equity? Or does the homeowner want to surrender the property and decide to pay neither the first mortgage nor the second mortgage holder? So the amount of methods to handle this equation vary in terms of what the homeowner really wants to do and what the homeowner is capable of financially paying over the next several years. If someone wants to keep their home, they should make the first and the second mortgage payment without interruption.
