Friday, September 24, 2010

Second mortgages may haunt borrowers in foreclosure

Second mortgages may haunt borrowers in foreclosure:

"How pervasive is the problem?

'I see it all the time,' says accountant Earl Salter, an enrolled agent with Norwalk Business Service in Norwalk, Calif. Financially shaky owners who have lost their homes to foreclosure and face second-lien lenders demanding repayment 'have two choices: file bankruptcy or try to strike a deal with the holder of the second to accept 10 or 15 cents on the dollar' owed, he said.

If lenders and borrowers don't strike a deal, lenders may garnish the borrowers' wages and other assets, if the owners have some income or the potential for income. In some cases, banks sell the junior-lien loans to collection agencies, which take over recovery of the debt.

While many banks are making decisions about repayment of second-lien loans on a case-by-case basis, lawmakers are seeking solutio"

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