The Offer Company explaining what happens to a second mortgage during foreclosure in Arizona

How foreclosure affects second mortgages

If your Arizona home goes through foreclosure, the first mortgage lender gets paid first from the auction proceeds. The second mortgage (or HELOC) is junior in priority.

That means:

If the sale price is high enough, the second mortgage may get paid in part or full.
If the sale price isn’t enough to cover it, the second mortgage may be wiped out — but that doesn’t always mean the debt disappears.

What a wiped-out second mortgage means

Even if the second lien is removed from the property, the lender may still pursue you directly for the balance owed (sometimes called a deficiency or unsecured debt). This could result in collection efforts or lawsuits after foreclosure.

Your options with a second mortgage

Negotiate or settle: Work directly with the second lender before foreclosure.
Sell before foreclosure: Protect equity and potentially pay off both loans.
Loan modification: Rare, but sometimes lenders will adjust terms if foreclosure isn’t ideal for them.
Seek postponement: More time may allow you to find a buyer and cover both loans.

Common misconceptions

“The foreclosure wipes out my second mortgage completely.” False — the lien may go away, but the debt often survives.
“I can just ignore my HELOC.” False — second lenders may still pursue collection after foreclosure.

Proof from Arizona homeowners

“I didn’t know my second loan could survive foreclosure. The Offer Company explained my risks and helped me sell before auction to protect equity.”
— Samantha T., Scottsdale

Why trust The Offer Company

We help Arizona homeowners understand how first and second mortgages interact in foreclosure. With Hope, our AI assistant, you’ll get plain-language answers, reminders, and a plan that accounts for every loan on your property.