You’re in debt up to your eyeballs. You can’t keep up with the mortgage and you are going to lose your home. It doesn’t get any worse than that, right? Wrong.
Lawyers for troubled Staten Island homeowners say they are beginning to see examples of clients who go to the bank to take out money and find that their accounts have been frozen or wiped out by other banks or debt collectors — the entities holding second mortgages on houses already in default on the first and primary mortgage. Some are learning the lender or debt collector has already gone to court and secured a judgment to garnish paychecks.
It’s a move more in line with the traditional debt collection industry, which typically targets credit card debt, and it’s dragging the house and what little cash reserves people often have into the foreclosure battleground. Experts say it’s an end-run by second lien holders around the traditional foreclosure process, which involves only the first mortgage holder and provides important legal protections for the homeowner.