Lenders can proceed for foreclosure if you default on a home equity loan. When you default on your loan, what the home equity lender does depends on the value of your home. Foreclosure will be the first choice of the lender, in case you have equity in your home. That is because there is an actual chance of recovering some of the money after the initial mortgage is paid off. Chances of foreclosure depends on the number of equity left.

Homeowners find the value in their homes drops so much that they owe more than what they would get in a sale, sometimes, during a tough housing market. A home is considered underwater in these situations. Here if the lender doesn't get back what you owe them on the second mortgage even after selling the home then foreclosing wouldn’t be in the lender’s best interest.

Instead, you may get sued by the lenders for the money you owe them. Though a lawsuit may look less scary than a foreclosure procedure, remember that it can still affect your credit scores. The lenders can also claim your wages, try to claim your other properties or levy bank accounts to get what is owed.

Additional Reading: What Is A Home Equity Loan