Foreclosure eminent. Here is the situation... How bad?

If either loan is foreclosed on, the house is sold, and whoever is in 1st lien position gets paid first, and then whoever is in 2nd lien position gets paid second...if there is enough money left over.

Yes, it will not only ruin his credit (which is already shot with the 9 months of no payment on a major account), a foreclosure will effectively bar you from purchasing property for 3 to 5 years.

I can't believe he abandoned the property.

Also tell him, that people think that just b/c a home is foreclosed on...that's the end of it. It's not. If there isn't enough money to cover both loans in the equity of the home...they WILL come after him for the rest.

A foreclosure is much worse! In a foreclosure the bank will file the proper documentation to have the home put up for public sale. You will have no choice in this because the bank would have put a clause in note and/or mortgage that they could use any legal remedy to recover their funds if you default in payments. Once the sale takes place you will receive a judgment against you for the deficiency, in other words whatever you owed on your mortgage, subtract that by what the home sold for and that is what you owe in your deficiency judgment. In essence, you lose your home and still have to make monthly payments on it (if you don't the bank will garnish your wages). Bankruptcy is a better option. Not what most people would think, but this way you will not have your wages garnished from the deficiency judgment. Filing bankruptcy is not much worse on your credit score either. A bankruptcy will show up on your credit report, but so will a foreclosure. Bankruptcy sometimes scares people because they think they will lose their car(s) or other personal property, but that is typically not the case in either a Chapter 7 or a 13. Contact a local Bankruptcy Attorney (most have initial consultation free). Tell him/her your sitaution and they can give you more information and further consequences of both scenarios.

They will have to evict him, and give him notice per Forcible Entry and Detainer Statutes. When the house is foreclosed upon, the IRS will be payed off first, then the first and second lien. If they have money left over I believe they have to give it to him, as in the event of an auction. If the bank dumps the house I believe they won't show a profit. If everything isn't paid off he is still liable for the remained of the lien and will have declare bankruptcy or work out a payment plan. See how much equity he has in the house and call up a Realtor.

Tell him to claim bankruptcy immediately(ch 7 only). As soon as the BK is discharged, he can buy a new car. Its the best way for him to start his credit over, plus he can flush his other unsecured credit card debts down the toilet too. The creditors wont be able to come after him either. Its like a reset button that only takes 3 months or so.

I had a house once that was starting to go through the foreclosing process, I think I was only about 3 months behind on my mortgage.

I was very lucky that I had a realitor sell it for me in only 2 weeks. I was able to pay off the loan and I still walked away with $6000 in my pocket.

Tell him to sell it fast!!

Try and sell the house in advance, if VERY lucky they might recover more then the banks will when they forclose, the problem with a forcloser is the banks will only chase the amout that is left on the loan and therefore will sell it at no profet to your firend.

What he needs to do is go to someone that buys houses in shape like this, usually they find you when you go on forclosure list. Then, he needs to sell the house to this person that comes in and use the money to pay the loans. That's what my parents had to do, this guys credit is already ruined from not paying, but that's his best option at this point.