Question: What happens to second trusts and mortgages in a foreclosure?

Answer: When a property is foreclosed, it is sold to the highest bidder. Usually the lender with a first mortgage or first trust bids enough on the property so that any buyer must at least pay off the first loan.

As to the holder of the second trust or the second mortgage, that individual cannot collect a dime until ALL money due the first note holder has been repaid.

Because second trusts and mortgages represent more risk than first loans, they command a higher rate of interest.