Non performing 2nds

[Joshua Andrews]

So I'm a little confused regarding non performing 2nds. Most I've seen have combined LTV equaling negative or at a minimum 100% equity. Meaning there is no "real" equity protecting the 2nd position.

I've heard various scenarios of workouts with the borrower, settling for less, etc. But how can an investor make money when there is no equity and the borrower wont settle, do a workout or basically tells the note holder to pound sand?

I've heard that yes, you can foreclose from the 2nd position but how would the investor make any profit when there is no equity to begin with? Almost seems your at the mercy of the people who want to cut a deal with you, and the rest you cant do much about. I'm sure I'm mistaken here. Just trying to understand the model.

Appreciate any feedback or possible scenarios from seasoned investors out there!