Question: If a house if forclosed, isnt all debts against the house forgiven (such as 1st and 2nd mortgages)? 

Answer: NO.  IN most cases you can still owe money.  Your house was merely the security for the loan.  Lenders are in the business to make money - "forgiveness" is not usually a business term.  \n\nExample:\n\nLets say you had a mortgage for $100,000.  When you made your payments you mostly paid the interest so at the time of the foreclosure you owned $97,000 on the loan you signed.  \n\nAfter it is foreclosed the bank/lender sells the house for $85,000.  \n\n     $97,000  (amount you promised to pay)\n -     85,000  (amount the lender got for selling the house)\n____________\n     $12,000   (the amount still owning on the note you signed)\n\nThey can sue you to recoup the amount they lost.\n\nAlso, when a house is foreclosed the house now "belongs" to the Lender.  It is no longer your house.  If the bank sells the house for a profit (more than you owe) they keep the difference.  After all, they just sold THEIR house.
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