If your first mortgage takes a deed in lieu, what happens to the second mortgage?

without reading the paperwork, or knowing which state this is in, my bet is that the terms of your second mortgage prohibit this without their consent.

it may be that the second mortgage company would then have the option to buy out the first and thus take the house. They also might have the option to immediately sue you for the amount owed.

are you also planning to file for bankruptcy? you might need a BK attorney before this is over.