foreclosure on an 80/20 mortgage

[janellmalloy]

My husband and I are debating whether or not to let our home go into foreclosure or try and do a short sale. I know the process of the short sale but I am unsure of how the process works with an 80/20 mortgage if it goes into foreclosure. If the 1st leinholder starts the foreclosure process what happens as far as the 2nd leinholder? Will the second leinholder tax us (1099) on the difference for what the house actually sells for and/or would they try and come after us for that difference amount? We reside in Michigan and I have heard several different answers as to what would happen. Thanks for the help!

 

[seniorjudge]

Q: If the 1st leinholder starts the foreclosure process what happens as far as the 2nd leinholder?

A: The junior lien dies in the foreclosure.


Q: Will the second leinholder tax us (1099) on the difference for what the house actually sells for and/or would they try and come after us for that difference amount?

A: A 1099 is not a tax. You may get one on a foreclosure and you may get one on a short sale. I do not know if deficiency judgments are allowed in your state.