Study Shows Delinquent Borrowers May Continue Paying Second Mortgages

By Kyle Chezum Updated on 12/20/2010

12/20/2010

A new study has shown that borrowers who default on their first mortgages may not necessarily default on second mortgages, especially if those second mortgages are home equity credit lines.  According to the study, one in five borrowers who go through foreclosure on a first mortgage continue making payments on a second mortgage.

This may show why loan modifications are difficult to secure.  “The availability of a loan modification may provide incentives for borrowers to stop paying on their first mortgage while staying current on their second,” the authors of the study determined.  Banks who don’t want to lose out on first mortgages may be unwilling to allow loan modifications if borrowers are still current on second mortgages.

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