<P> Any liens resulting from other loans against the property being foreclosed (second mortgages, HELOCs) are "wiped out" by foreclosure, but the borrower is still obligated to pay off those loans if they are not paid out of the foreclosure auction's proceeds . </P> <P> In the wake of the United States housing bubble and the subsequent subprime mortgage crisis there has been increased interest in renegotiation or modification of the mortgage loans rather than foreclosure, and some commentators have speculated that the crisis was exacerbated by the "unwillingness of lenders to renegotiate mortgages". Several policies, including the U.S. Treasury sponsored Hope Now initiative and the 2009 "Making Home Affordable" plan have offered incentives to renegotiate mortgages . Renegotiations can include lowering the principal due or temporarily reducing the interest rate . A 2009 study by Federal Reserve economists found that even using a broad definition of renegotiation, only 3% of "seriously delinquent borrowers" received a modification . The leading theory attributes the lack of renegotiation to securitization and a large number of claimants with security interest in the mortgage . There is some support behind this theory, but an analysis of the data found that renegotiation rates were similar among unsecuritized and securitized mortgages . The authors of the analysis argue that banks don't typically renegotiate because they expect to make more money with a foreclosure, as renegotiation imposes "self - cure" and "redefault" risks . Government supported programs such as Home Affordable Refinance Program (HARP) may provide homeowners the ability to refinance their mortgages if they are unable to obtain a traditional refinance due to their declined home value . </P> <P> A dual - tracking process appeared to be in use by many lenders, however, where the lender would simultaneously talk to the borrower about a "loan modification", but also move ahead with a foreclosure sale of the borrower's property . Borrowers were heard to complain that they were misled by these practices and would often be "surprised" that their home had been sold at foreclosure auction, as they believed they were in a "loan modification process". California has enacted legislation to eliminate this type of "dual - tracking" - The Homeowner Bill of Rights - AB 278, SB 900, That went into effect on January 1, 2013 . </P> <P> A 2011 research paper by the Federal Reserve Board, "The Post-Foreclosure Experience of U.S. Households," used credit reports from more than 37 million individuals between 1999 and 2010 to measure post-foreclosure behavior, especially in regard to future borrowing and housing consumption . The study found that: 1) On average 23% of people experiencing foreclosure had moved within a year of the foreclosure process starting . In the same time, a control group (not facing foreclosure) had only a 12% migration rate; 2) Only 30% of post-foreclosure borrowers moved to neighborhoods with median income at least 25% lower than their previous neighborhood; 3) The majority of post-foreclosure migrants do not end up in substantially less - desirable neighborhoods or more crowded living conditions; 4) There was no significant difference in household size between the post-foreclosure and control groups . However, only 17% of the post-foreclosure individuals had the same number and composition of household members after a foreclosure than before . By comparison, the control group maintained the same household companions in 46% of cases; and, 5) Only about 20% of post-foreclosure individuals chose to live in households where one person maintained a mortgage . Overall, the authors conclude that it is "difficult to say whether this small effect is because the shock that leads to foreclosure is not long - lasting, because the credit constraints imposed by having a foreclosure on one's credit report are not large, or because housing services are more inelastic than other forms of consumption ." </P>

Who manages the properties that have been foreclosed upon and must now be sold by the servicer