How can I get cleared with my 2nd mortgage after my property foreclosed?

Asked by Masa, Culver City, CA Tue Oct 25, 2011

I had a condo foreclosed in July 2011. When I purchased it a bank loaned me 1st mortgage $260,000 and 2nd which is home equity $48000
I was told from the realtor who was taking care of my foreclosure that the both mortgage would be cleared.
but I still receive bills for the 2nd mortgage.
How can i get cleared with this? the bank tells me it is separate...
Thank you

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John Juarez, Agent, Fremont, CA
Wed Oct 26, 2011
I respectfully disagree with Mike in part but I agree that you should seek legal advice.

In a foreclosure, the lender’s lien on the house is wiped out but the debt is still outstanding. You signed a promise to pay back a loan – a promissory note – and that note still exists and you may still owe the money. It is tragic to lose a house and then be expected to pay the money that was lent to you against the collateral that was the house. You need legal advice in regard to what you should do. Under some circumstance you may owe the money and under some circumstances you may not. An experienced real estate attorney can explain and suggest an action plan for you.
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1 vote
Mike King, Agent, Los Angeles, CA
Tue Oct 25, 2011
Your realtor gave you the correct information, all liens are wiped out, once the first lien has been foreclosed on, except for tax liens. I would consult with an attorney who has experience with foreclosures. If may take a cease and desist letter to the bank.
1 vote
Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Fri Oct 28, 2011

Consult with an attorney on this. Mike is not correct when it comes to the 2nd. John's answer is the one you should be considering.

There are certain 'case specific' facts in the State of California that might protect you from having to pay the 2nd. For example, if the loan was purchase money (in other words, it is the original loan on that house that allowed you to buy the house), then most likely you don't owe the money. However, you said it was a home equity loan, which usually means you borrowed the funds AFTER you bought the house. In this case, you would still owe the debt.

As John said, the lien (which is simply the pledge of collateral/security) is wiped out but not the note (the promise to repay). What the holder of the 2nd now has is an unsecured note, but they can still pursue you for payment. Take your specific facts to an attorney and get a free 15 or 30 minute consultation. If you owe the money, they will be able to advise you of your other options in this situation.

Sorry to hear you are going through this. Hang in there, but get some good advise this time.

Shel-lee Davis, QSC®
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0 votes
Mike King, Agent, Los Angeles, CA
Wed Oct 26, 2011
This link will explain why lenders cannot pursue you for a deficiency judgement in California.
Best of luck to you.
0 votes
Emily Knell, Agent, Huntington Beach, CA
Wed Oct 26, 2011
The 2nd lien holder can still go after you for a deficiency judgment. Your Realtor should have been urging you to do a Short Sale instead of just "walking away".

In a short sale, the 2nd lien holder would have had to agree to release you of the lien as paid in full & could not go after you in the future for payments or a judgment.

Sounds like you need a new Realtor, when your credit is better & you can buy again.

Why did you have a Realtor "taking care of your foreclosure"? They should have been 'taking care of a short sale" & successfully closing it.
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0 votes
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