2nd position exit strategy

[Tim S.]

Hi Note People,

I'm trying to learn more about NPN 2nds, and wondering about this scenario: (assume 1st is performing)

If I have a 2nd position Non-performing note, without enough equity to even cover the first, or just barely cover the first, is there any way to make a profit?  Has anyone here made a profit in this situation? 

 I understand that you can still foreclose from 2nd position, but it seems like a bluff at that point. If the borrower calls your bluff and refuses to pay anything, then there is really nowhere to go with it is there? You can still foreclose, but how do you make any money if the sale of the property won't even pay off the 1st?

Are you banking on the fact that the borrower doesn't want to take the chance that you may foreclose on them, and will agree to some payments? I could see this could work sometimes if they are ignorant of how this process works, and they are just scared, and pay up. But if they figure out you really don't have any leverage without equity, why would they pay up?  I expect that most people probably are ignorant of the process, but I wouldn't want to count on that as my only way to profit.

Seems like a longshot to make this work, am I wrong?