What happens with the 2nd mortgage when I give the 1st mortgage holder a deed in lieu of foreclosure?

I am unemployed and cannot pay the mortgage payments. I have the home on the market but it will not sell for the loan amount. I was thinking of giving the 1st mortgage holder (80%), a deed in lieu of foreclosure. Will the second mortgage holder (20%) be able to get any money or be able to file a judgment against me as home owner? I live in the State of Arkansas.

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3 thoughts on “What happens with the 2nd mortgage when I give the 1st mortgage holder a deed in lieu of foreclosure?

  1. Once the first mortgage holder sells it, any overage will go to the 2nd mortgage. If there is any left after that, then you get a check. If what it sells for does not cover both mortgages, then you are either required to pay the difference or claim it on your taxes as a “gift” and pay taxes on the amount that the mortgage companies wrote off.

  2. Ultimately the second will likely end up writing it off, although have no doubt they will seek remittance from yourself. Likewise will have to report forgiveness by 1st on your taxes.

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