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Josh, Other/Just Looking in 93312

In California can my 2nd lien holder ( home equity loan )come after me for any balance owed to them in a Defau

Asked by Josh, 93312 Fri Apr 24, 2009

In California can my 2nd lien holder ( home equity loan )come after me for any balance owed to them in a Defaut( Foreclosure) ?

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There are always many factors that come into play. In California, seconds on homes are forgiven if your loan was for home improvements or for the original purchase. If however, you bought "stuff" with the money, you will be responsible for that dept. It is always a good idea to consult your attorney or CPA if there are other circumstances that affect your situation.
0 votes Thank Flag Link Thu Mar 13, 2014
California is different than a lot of states where the banks deficency rights are defined by if the loan is recourse or non recourse. Which is typically determined if the loan was used to purchase the property or if it was a refinance. If it was refinanced or a home equity are such that a bank can go after the deficency.

This is a good question, because lots of people think they are in the clear if they get foreclosed on by the first mortgage loan. It is best to review the options when the foreclosure process starts. Lots of people are shocked when the second mortgage sues for deficiency and collection.

Keith Manson
First Weber Group
Certified Distressed Property Expert
Metro Milwaukee

http://www.milwaukebailout.com
0 votes Thank Flag Link Sun Dec 5, 2010
If the 2nd loan lender or holder is wiped out by a foreclosure on/of the 1st loan, then the 2nd lender legalistically speaking can sue on the promissory note, if the note is a non-purchase money loan(meaning a loan not loaned to you to help you buy or finance the purchase of the property). If the 2nd lender is foreclosing on you in a non-judicial not thru the court regular trustee foreclosure sale , then the 2nd lender cannot ever chase or pursue or sue you for a loss that the lender suffers in that non-judicial trustee auction or foreclosure. However I have never seen a lender sue a borrower on a trust deed secured promissory note in our area, and I have been lending in Kern County , Bakersfield, CA area for 30 years. However you should consult a lawyer, to be sure, because I am not a lawyer. I am a direct lender of real estate loans in Kern county. Dan Cook, Pres/CEO Equity 1-Loans in Bakersfield, CA, tel 6613989382. email cocinero2@hotmail.com
0 votes Thank Flag Link Sat Dec 4, 2010
If the 2nd loan lender or holder is wiped out by a foreclosure on/of the 1st loan, then the 2nd lender legalistically speaking can sue on the promissory note, if the note is a non-purchase money loan(meaning a loan not loaned to you to help you buy or finance the purchase of the property). If the 2nd lender is foreclosing on you in a non-judicial not thru the court regular trustee foreclosure sale , then the 2nd lender cannot ever chase or pursue or sue you for a loss that the lender suffers in that non-judicial trustee auction or foreclosure. However I have never seen a lender sue a borrower on a trust deed secured promissory note in our area, and I have been lending in Kern County , Bakersfield, CA area for 30 years. However you should consult a lawyer, to be sure, because I am not a lawyer. I am a direct lender of real estate loans in Kern county. Dan Cook, Pres/CEO Equity 1-Loans in Bakersfield, CA, tel 6613989382. email cocinero2@hotmail.com
0 votes Thank Flag Link Sat Dec 4, 2010
Hi Josh,

Have you done anything yet?
I work for an attorney and we do mods as well. Are you in a financial hardship? Is your first loan more than 31% of your income? Have you lost income or lost value in your home?

I think you should try a mod its worth it.

JoAnna Jensen
0 votes Thank Flag Link Mon Jan 4, 2010
Since it's a HELOC, and not "purchase money", it's a recourse loan. So yes, they can come after you.

If you have substantial assets it's a risk they'll purse. Not many stories out there of 2nd mortgage holders suing however. Most foreclosures to date have seen most of their net worth go away and it's expensive to file suit and get a judgment, only to have the defendant file bankruptcy.

If you don't have much in the way of assets for them to go after, the unsecured debt will probably get sold to a collection agency for a fraction of what's owed, then the collection agency will do whatever they can to get money out of you.
0 votes Thank Flag Link Fri Apr 24, 2009
It depends upon if it is a recourse or non-recourse loan. If you did not take the loan out at the same time as the first trust deed was, typically at the time of purchase, the second lien could be categorized as a recourse loan.

In a recourse loan, the lender may go after you for the amount of the loan at any time. Even if it is unsecured debt, you may be responsible for the amount owed and you may need to file this unpaid debt as income on your taxes. If this does occur and you no longer live or own the home it was once secured by then I would seek bankruptcy counseling right away to possibly eliminate this liability once and for all.

Diane Wheatley, Broker
diane@moveupproperties.com
0 votes Thank Flag Link Fri Apr 24, 2009
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