Dear XXXXXXXXXX - Yes, anyone with a lien or mortgage on real estate can institute a foreclosure action. From a practical standpoint it is generally only the first mortgage holder who forecloses unless there is plenty of equity in the property. Since all liens and mortgages are wiped out in foreclosure sale the second mortgage holder usually ends up with little or nothing so it isn't worth their while to spend the money on the foreclosure action.
Of course, I cannot predict what your lender will do but unless you have a lot of equity in the property it is doubtful they will be the ones who foreclose. In the other hand, they are not required to agree to a settlement offer for less than the principal owing on the loan.
Dave Kennett
Lawyer (JD)
25 years experience in general law, including real estate, criminal, traffic, and domestic relations