[GrantS]

Here is situationHouse is in CA, is up side down by 35% and is currently in default.Mortgage in my name but do not currently live in the house.There is a first and a second.The funds were purchase money and have not been refinanced and or no money has been taken out.If I let the house go back to the bank the fist will only get about 84% of what is owed and the second will be wiped out.Is there any reason the second can or will seek a deficiency judgment?If the second "forgives" the debt for what amount of time can they still legally call on the debt to be paid.If that 35% turns into debt reduction will that become ordinary income and be taxed?

[realtor.sailor]

The second mortgagee cannot seek a deficiency judgment unless they initiate foreclosure and to do so they would have to pay off the first mortgage. If the first mortgagee does not seek a deficiency judgment, then the forgiven amount can be reported to the IRS and taxable income. Again, the second is SOL.realtor.sailor