In a deed in lieu of foreclosure, you avoid a foreclosure by giving your property back to the mortgage lender.But what if you have a second mortgage on your property? Is deed in lieu an option? And if it's not, are there problems with foreclosure involving a second mortgage that you should be aware of?The answer is yes. There are certainly major pitfalls to be aware of when it comes to doing deed-in-lieu on a property that has two or more mortgages on it.First, let me explain how foreclosure works when you have a first and a second mortgage. The first mortgage often forecloses. The second mortgage may also be delinquent, but in order to foreclose, the second mortgage lender usually must "cure" the first mortgage loan. They have to make all your back payments and pay all your fees, and then the lender will reinstate the first mortgage. Now you owe the second mortgage lender all the money for late fees and interest and past payments that you used to owe to the first mortgage lender.I know this sounds confusing. But the point is that in a normal situation where you have equity in your property, the second mortgage holder will reinstate the first by making your payments for you, and then will come after you themselves for all the back payments.However, these are not normal situations today.Many second mortgage holders are not exercising their right to foreclose. They are not reinstating the first mortgage. They are simply letting the first mortgage holder foreclose.But this raises a major issue. If your house goes to foreclosure and is sold at auction, the first mortgage holder will usually get your property back. But what of the second mortgage holder? They were "wiped out" as far as foreclosure is concerned. But what of their financial losses, the arrearages, fees, and the interest and principal that they are still owed?Good question. The second mortgage holder did not foreclose. They just waited. The house was sold at auction. Now it is possible for the second mortgage lender to go ahead and sue you in court for breach of contract.You may have thought you had a foreclosure out of the way, but there is nothing to stop the second mortgage holder from suing you. As long as they didn't pursue foreclosure as a remedy they can pursue a breach of contract suit against you. You signed a note and didn't pay on it.They can probably get a judgment against you. They can probably demand you appear at a judgment debtor exam. They can make you list your properties and bank accounts and they can garnish your wages.Not a pretty picture. See a lawyer and learn all you can about foreclosure and deed in lieu.