The past ten years leading up to 2007-08 were amazing years for the real estate market. Home values were skyrocketing at double-digit percents across the entire nation and everybody was building up equity in their homes. Home loan providers and lenders capitalized on this thriving real estate market by providing second mortgages and home equity loans to people who had built up a significant level of equity in their property and wanted to access this equity as cash. It became routine to use your property as a virtual ATM machines by extracting the equity via a second mortgage or home equity loan and then using the money for whatever reason.
The problem came in 2007-08 when the entire real estate market began to tumble and home prices began to drop and stagnate. People who took out second mortgages and home equity loans were often left with notes on upside down properties with no way to payback the lenders. People began to go into foreclosure, and this meant that they were going to eventually lose their homes unless they began making payments on the variety of loans that were against their property.
Many people began to wonder what would happen if they only defaulted on their second mortgage and kept paying their first mortgage. Would they still have to foreclose and lose their property? Well, not so much because often times with situations like this the person that defaults on their second mortgage will still be able to stay in their property and if the house is upside-down then it is pretty much commonplace for the homeowner to reach an agreement with the bank or lender so that they can come to terms with the second mortgage that they may have taken out years ago. The majority of homes that default on second mortgages do not end up going into foreclosure and if you find yourself in this situation you can be rest assured that if make an effort to contact your lender then you shouldn’t have to go into foreclosure unless you stop paying your first mortgage.