A second mortgage is an additional mortgage homeowners can take out in order to cover major expenses, such as the cost of college tuition or major home improvements. Unfortunately, many homes with second mortgages are “underwater,” meaning the outstanding balance on the first and second mortgages exceeds the home’s value. In this case, the second mortgage lender could risk losing its security interest if the first mortgage lender forecloses on the property.
If your home is underwater and you are delinquent on your second mortgage, you may be able to settle your second mortgage in order to relieve some of your debt and/or improve your ability to sell the home. Much like settling credit card debt, settling a second mortgage involves an agreement between the lender and the borrower, indicating that the lender will accept less than the full amount the borrower currently owes. In return for settling a second mortgage debt, the lender agrees to remove the lien from the property and release any claim they have against the borrower regarding the unpaid debt.
Keep in mind that you can also “strip” this lien by filing for bankruptcy protection under Chapter 13, which is why we recommend contacting a knowledgeable debt settlement attorney who will examine your financial situation and advise you on which option best suits your needs.