What happens if I stop paying my second mortgage?

The lender will likely initiate collection activity. They will mark you “late” on your credit report … if this happens for more than 120 days, most future lenders will consider it akin to a foreclosure, severely limiting your ability to obtain future home financing for 3-7+ years. In some areas, depending upon home values and the potential loss for the lender, they may initiate foreclose proceedings. It is more difficult for a second lien holder to foreclosue, but it is not impossible and it is within their rights in most cases.

MUCH better is to contact the lender, and let them know that you are having trouble. Work with their loss mitigation department to lower your payments, modify your terms, or reduce your principal balance so that you can continue to pay the loan (or sell the home). All of these “outs” also affect your credit – but much less so than simply abandoning your responsibility to pay the loan.