My house was foreclosed on and I still have the 2nd mortgage requesting me to pay off my loan with them. This was my primary home at the time in

Asked by Seeking Advice, Indio, CA Sun Nov 1, 2009

California. The total loan amount is $84,000. What are my options?

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Joanna Jensen, Other Pro, Livermore, CA
Sat Apr 3, 2010
Totally depends on a few things.
1) What type of loan was the second, purchase money, or equity line?
2) Was your second lender the same as your first?
Do you know the current market value of your home when it was foreclosed on?

How long ago did you receive a bill? If you are with a collector you do have the right to make them Validate the debt. Ask them for a copy of the note and deed of trust. Under FDCPA and Fair Credit Reporting Act you can ask for the original agreement AND the most importint thing I think some people may not realize, is if this bill is comming from a collector you definately should make them prove they have the right to collect from you, sometimes collectors do not get all of the information. Definately make them validate the debt.
This is not Legal Advice.

JoAnna Jensen
Legal Assistant
Certified Debt Negotiator, IAPDA
Volo Law Legal Realty
925 699 5041
0 votes
Steven Ornel…, Agent, Fremont, CA
Mon Nov 2, 2009
Hi Seeking Advice, I am very sorry to hear of your situation.

I'M NOT A LAWYER, nor am I aware of ALL the details of your circumstances. THE FOLLOWING IS NOT ADVICE, only personal opinion.

First, know that there are two types of foreclosure: judicial and non-judicial (a.k.a. trustee sale foreclosure). Most foreclosures in CA are via the non-judicial method due to the expense of a judicial foreclosure. Given these definitions, there a number of ways a lender may or may not be able to go after personal assets (like your cash) via a deficiency judgment after a foreclosure (it does make a difference on how the property is foreclosed.)

For an Owner-Occupied home where:

1) A lender made a purchase money (non-recourse) loan, then NO deficiency judgment can be attempted. If a senior lienholder forecloses on the property, the "wiped out" junior lienholder who no longer has a secured note may not sue on this promissory note.

2) A Seller financed a purchase money loan (non-recourse), NO deficiency judgment can be attempted (non-recourse loan). If a senior lienholder forecloses on the property, the "wiped out" junior lienholder who no longer has a secured note may not sue on this promissory note

3) You as the owner of the property, refinanced the property (recourse loan), then a deficiency judgment CAN be attempted if a judicial foreclosure was used. This is NOT allowed under a non-judicial foreclosure. HOWEVER, if a senior lienholder (i.e. the first loan) forecloses on the property, the "wiped out" junior lienholder (i.e. the home equity lender) who no longer has a secured note MAY SUE on this promissory note.

Again, judicial foreclosures in California are rare, as the lender must sue the borrower to obtain a decree of foreclosure and order of sale. The court may also order that the borrower has up to one year to redeem the property. For this reason, non-judicial foreclosure is more popular.

Be aware that just because a loan is titled a "Home Equity Loan" it DOES NOT necessarily mean it has recourse/deficiency judgment status as the use of the funds can establish recourse protections.

A REAL ESTATE LAWYER SHOULD REVIEW YOUR SPECIFIC SITUATION and this is where your options should be derived from.

Best, Steve
0 votes
Dan Sanchez, Agent, Burbank, CA
Sun Nov 1, 2009
Dear Seeking Advice,

If your 2nd mortgage was a home equity line of credit aka a "HELOC", then you may still be liable for the debt because that mortgage is considered a line of credit and not a loan. Also, if this 2nd mortgage was obtained through a refinance, that would be another indication that you are liable for that debt. I would definitely contact your CPA or consult a real estate attorney to discuss your options.


Dan Sanchez
Dilbeck Realtors
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