Second mortgages

[Mark Forest]

Why would a bank or anyone take a second mortgage?  If things go bad wont the first lien holder  get everything?    The only thing I can think of is that the market value of the property hopefully  increases past the money due the first mortgage holder.  I am just wondering for education purposes. Thank you to all who answer. 

[Jeff Rabinowitz]

Most things related to lending are State specific but in Michigan the first lien holder has no obligation to notify junior lien holders of any defaults or foreclosure actions. (That is one of the aspects that makes a second lien considerably riskier for a lender.) A second lien holder cannot impose that obligation upon the first lien holder no matter what their documents state. The documents pertaining to the second mortgage loan bind the borrower and the lender of that loan but no one else.