I'd like to know what idiot lender allowed two people to have two separate mortgages on the same property.
You can't have two first mortgages on a property with one portfolio number (property ID for tax purposes).
A couple of things can happen:
1. The mortgage that was obtained first will be considered the first mortgage. If this mortgage goes into foreclosure the person with the second mortgage will lose the property but will still be liable for his/her loan balance, but unsecured.
2. The mortgage that came second will be a "clouded" title. People who hold clouded titles, even if secured by a mortgage, can lose their investment.
3. The two mortgage holders can be taken to court for fraud because they didn't reveal all of the facts to the lenders. The lender of a mortgage MUST be informed when a signficant change occurs to the property that they are holding as collateral for a loan ... this includes other loans on the property (such as equity lines and second mortgages).
I'm sure there are other legal ramifications. I'd get a second opinion from a different lawyer. This one sounds like s/he is just giving you the answer you want to hear. If this goes to court, a judge may very well give you a different answer all together.
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