Behind on Your Second Mortgage? What You Need to Know Before Foreclosure Becomes a Reality

Owning a home in Los Angeles is an incredible accomplishment, but for many homeowners, carrying both a first and second mortgage can create serious financial pressure. When unexpected challenges arise, such as job loss, medical expenses, or inflation-driven cost increases, some borrowers fall behind on their second mortgage while continuing to pay the first.

Unfortunately, being current on your first mortgage does not protect you from foreclosure. In California, a second mortgage or home equity line of credit (HELOC) lender may still take independent legal action to recover what’s owed. Understanding how second mortgage foreclosure works, and how to respond before it escalates is essential for safeguarding your home.

The Overlooked Risk of Second Mortgage Default in California

Many homeowners are surprised to learn that a second mortgage is not just an extension of the first; it’s a separate loan secured by the same property. The lender holding that second lien still has the right to foreclose if you stop making payments, even if your first mortgage remains in good standing.

In high-cost regions like Los Angeles, where home values have risen sharply, lenders are more likely to pursue foreclosure because there’s often enough equity in the property to make it worthwhile. This is especially true when housing markets remain strong and property values can cover both loans.

How a Second Mortgage Differs From a First Mortgage

Your first mortgage is the “senior lien,” meaning it takes priority in being paid off if the home is sold or foreclosed upon. The second mortgage, also known as a “junior lien”, comes after the first. Because of this lower priority, second mortgage lenders face higher risk and often charge higher interest rates.

If a foreclosure sale occurs, proceeds first go to the senior lienholder. The second lienholder receives payment only after the first is fully satisfied. If there isn’t enough money left over, the second lender may recover little or nothing, but they still have the legal right to initiate foreclosure themselves if there’s adequate equity.

What Happens When You Stop Paying Your Second Mortgage

Once a borrower misses payments, the second mortgage lender can begin collection efforts. Initially, you might receive collection calls or letters. After continued delinquency, the lender can record a Notice of Default, the first formal step in California’s nonjudicial foreclosure process.

After the notice is recorded, you generally have at least 90 days to bring your payments current. If the loan remains in default, the lender may then issue a Notice of Trustee’s Sale, giving at least twenty days’ notice before the property is auctioned.

Even if you are current on your first mortgage, this process can move forward. Once the property is sold, both liens are typically paid from the sale proceeds according to their order of priority.

If the home sells for less than what’s owed, the first mortgage lender is paid first, and the second lender may be left with an unpaid balance known as a deficiency. Whether the lender can collect that deficiency depends on the type of loan and California’s anti-deficiency laws.

Can a Second Lienholder Really Foreclose on Your Home?

Yes. In California, a second mortgage lender can legally foreclose if the deed of trust for that second loan includes a power-of-sale clause. The law governing nonjudicial foreclosures, found in California Civil Code section 2924, gives any lender holding a deed of trust the right to initiate foreclosure after a borrower defaults. This process doesn’t just apply to first mortgages; it can also be used by second or “junior” lienholders.

The process follows the same steps required for any nonjudicial foreclosure. The lender must record a Notice of Default, wait at least three months, and then issue a Notice of Trustee’s Sale at least twenty days before the auction. The California Courts Self-Help Center confirms that a lender may sell a property without going to court if a borrower falls behind, as long as the proper notices and waiting periods are observed.

Importantly, this means that a second mortgage or home equity line of credit (HELOC) lender can move forward with its own foreclosure, even if your first mortgage is fully current, when there is enough equity in the home to recover what’s owed. The Consumer Financial Protection Bureau (CFPB) explains that a second mortgage is a separate loan secured by your home, which gives the lender certain rights, including foreclosure, if payments are missed.

In Los Angeles and other high-value markets, where rising home prices have built substantial equity, second lienholders have a strong incentive to act when borrowers fall behind. Understanding this risk and taking action before a Notice of Default is recorded can make the difference between protecting your home and losing it.

Legal and Financial Strategies to Avoid Foreclosure

If you’ve fallen behind on your second mortgage, early action is critical. The longer you wait, the fewer options you may have. Possible strategies include:

• Negotiating a settlement: Sometimes lenders agree to settle for less than the full balance, particularly if they believe foreclosure would be costly or slow.
• Loan modification or refinance: Depending on your finances, you may qualify for a modified payment plan or consolidation loan to catch up on arrears.
• Bankruptcy protection: Filing for bankruptcy can temporarily halt foreclosure proceedings through the automatic stay and may allow you to reorganize debt.

The right solution depends on your individual financial circumstances, property value, and debt structure. Seeking guidance from experienced Los Angeles second mortgage lawyers ensures that you understand your rights and all available options before foreclosure becomes a reality.

The Importance of Acting Early and Seeking Legal Guidance

Second mortgage default can spiral quickly into foreclosure, damaging your credit and threatening your home. Many homeowners in California assume that paying the first mortgage is enough, but creditors holding second liens are within their rights to act independently.

Taking early legal action not only protects your property but also gives you leverage to negotiate settlements or restructure debt. By consulting an attorney before the Notice of Default is recorded, you can explore preventive options that keep you in control.

Contact Wadhwani & Shanfeld

If you’ve fallen behind on your second mortgage or are receiving collection notices from your lender, now is the time to act. The attorneys at Wadhwani & Shanfeld understand the complexities of California’s foreclosure laws and have helped thousands of homeowners avoid foreclosure through strategic negotiation, settlement, and legal protection.

Contact our experienced Los Angeles second mortgage lawyers today to discuss your situation. We’ll help you understand your rights, protect your home, and find a path toward financial stability before foreclosure becomes a reality.

Sources:

California Civil Code §2924 – Nonjudicial Foreclosure Procedures

California Courts Self-Help Center – Guide to Foreclosures

California Courts Self-Help Center – Nonjudicial Foreclosures

Consumer Financial Protection Bureau – What is a second mortgage (junior lien)?

Office of the California Attorney General – Homeowner & Foreclosure Resources