Default
happens, hopefully not often, but it is a fact of lending. Upon default,
however, a holder of a second mortgage must find an objective, value-driven
manner in which to evaluate its options. Unfortunately, in many instances second position lienholders opt for one of two extreme
approaches—accepting a nominal amount in exchange for the release of the lien
or demanding an unreasonably high sum for satisfaction of the lien. Both
approaches are harmful for different reasons. Despite such prevalent behavior, with proper management, a defaulting second mortgage can provide a lienholder with a number of
options.