Question 1: Can a financial institution which has a second position or a second lien on a house initiate a foreclosure?
Answer: Bad news. The second mortgage lender can foreclose on the property, even if the first mortgage is in good standing with its lender. A second mortgage is a secured loan backed by the value of the home, just like the first mortgage.
The difference is that the first mortgage lender is paid ahead of the second mortgage lender in the event of a foreclosure. That's why it's called a second mortgage.
If the second mortgage lender initiates foreclosure proceedings, the first mortgage lender may step up and buy out the second's interest in the property. Conversely, the second could negotiate to buy the first mortgage. As long as the home's appraised value exceeds the combined loan balances, there's not a lot of additional risk, and there is a real benefit for one lender to control both mortgages.
If you thought you were safe by keeping up with the payments on the first mortgage while missing payments on the second, you're not. If the second mortgage lender has threatened or initiated foreclosure proceedings, they are well within their legal rights. Legal fees and related foreclosure costs for the defaulted mortgage may be capitalized into the modified principal
Question 2: I have paid my mortgage and all arrears except legal fees. The law firm says the foreclosure will continue unless the legal fees are paid as well. Can they do that?
Answer: Yes. Arrearages include all the past due payments as well as court costs, late fees, penalties, interest AND attorney's fees. So, they can continue with the foreclosure unless you can negotiate something with them or pay in full.
Question 3: May a lender perform an interior inspection of the property if they have concerns about property condition?
Answer: Yes, the lender may conduct any review it deems necessary to verify that the property has no physical conditions which adversely impact the borrower's continued ability to support the modified mortgage payment
There should never be a fee to get assistance or information from your lender or housing specialist.
Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan. Do not pay - walk away!
Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
Never submit your mortgage payments to anyone other than your mortgage company without their approval.