lf a home forecloses with a 2nd lien of 330k from original seller, can 2nd garnish my wages

Asked by Lbarill hurst, California Tue Jan 19, 2010

Home is in Simi Valley CA. 1st lien holder is Indymac, 2nd is previous homeowner. l make over 100k annually
and worry 2nd lien holder will go after me.

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Ted Mackel, Agent, Simi Valley, CA
Tue Jan 19, 2010

Here are a few things to consider. If your loans are "PURCHASE MONEY" Loans then in California there is non recourse (as I understand) on "Purchase money" meaning the loans used to buy the home.

Refinance money and Home Equity lines of Credit can have deficiency recourse rights.

Depending on the language on the 330k and if that note was a Seller Carry Back, then you should be okay; however with all these kinds of situations you should contact a real estate attorney.

I work with a good Real Estate Attorney if you need a referral. You can email me through my Trulia Profile or my contact page on my Blog.

IndyMac is a piece of work. The Taxpayers got duped on that mess. If you want to read how bad off homeowners are who have an IndyMac Loan, check out this http://activerain.com/blogsview/1243528/is-the-fdic-killing-…
Web Reference:  http://www.homebuysblog.com
1 vote
Joe Gino, Home Buyer, Kingman, AZ
Thu Nov 8, 2012
list it for sale stop making any payments force them to a short if they agree.. Ur off the hook for both loans your credit report will show slow pay debt satisfied for less than full amount.......
0 votes
Joanna Jensen, Other Pro, Livermore, CA
Sat Mar 20, 2010
Are you still in the home?
Do you want to keep it?
A short refinance may be. Your best bet. You get a new loan based on the current market value even if your credit has been damaged you may qualify.
Joanna jensen
Legal assistant
Account exec for short refinancing
Solutions for home owners
Web Reference:  http://joannajensen.info
0 votes
Barry Shapiro, Agent, Camarillo, CA
Sat Mar 20, 2010
Hello Lbarill,
We have posted a plethora of information on our website, pertaining to the issues you have mentioned here. Just because you earn over $100K annually, does not exclude you from qualifying for a short sale. In the event you decide the short sale option works for your scenario, we would negotiate with the private party 2nd lien-holder, in hopes of reducing their payoff -- plus require they cancel rights to pursuing the debt entirely in exchange for releasing the lien (reconveyance) and accepting less than the principal balance. Ventura County homeowners can find foreclosure help online at our website.
0 votes
Heidi Golff, Agent, Ventura, CA
Wed Jan 27, 2010
Hello; I am curious now....what did your attorney say? This, besides the regular meetings my company has with legal counsel to make sure we are up to date on these issues, is what I based my original answer on. This is not legal advice and I, again, tell you to seek an attorney. I believe my first answer was the right answer but it is only my educated opinion, not the fact of an attorney.

"California has enacted anti-deficiency legislation which is found in Code of Civil Procedure sections
580b and 580d. Code of Civil Procedure section 580b prohibits deficiency judgments based on the
character of the loan at the time it is made. A lender whose loan is made for the purchase of
residential property containing one-to-four units, one of which the borrower intends to occupy, and
whose loan is secured by that same property, may only pursue the security and not the borrower.
Additionally, section 580b prohibits a seller who has carried back a loan as part of the sales price of
the property from obtaining a deficiency judgment against a defaulting borrower. This seller carryback
rule applies to any type of property, not just residential one to four."

I still think you should consider a short sale....
0 votes
Joanna Jensen, Other Pro, Livermore, CA
Tue Jan 19, 2010
Hi Lbarill,
What you should try and do is negotiate with the 2nd.

This depends on a lot of things right now.
The current value of your home.
How much you owe on your first mortgage?
Is your home worth more than what you owe on your first mortgage? Is your 2nd mortgage underwater?.

I work for an attorney and we specialize in Restructuring Loans that are underwater or the interest is too high.
Has the first lender filed a notice of default?
Before the 2nd lender can garnish your wages a lot of things need to happen. First of all I would suggest finding our what the fair market value is of your home, then subtract what you owe.

Also, you need to look at all of your assets vs all of your debt. If your debt is more than your assets you may be considered insolvent. I am not giving legal advice but this is what I do every day for my clients.
First if your insolvent, and you have more debts than assets you may be considered Judgment proof. Again this in not legal advice. In order for them to be able to garnish your wages they will need to sue you. I am very happy to help or you can contact an attorney who specializes in Bankruptcy, insolvancy, debt settlement. I like attorneys who belong to NACA.

Best of Luck
JoAnna Jensen
0 votes
Ted Mackel, Agent, Simi Valley, CA
Tue Jan 19, 2010

There is deficiency recourse rights on refi money after foreclosure in California. More importantly, is that some lenders have tried to slip in recourse language into Short Sale agreements on Purchase money loans in which case the home owner should be careful as the Trustee Sale on that Purchase money will shut down any recourse.

You can still try a short sale and your second may get as much as $10,000 depending on the negotiations. Since this sounds like purchase money then a Short Sale could be an alternative. Just keep in mind that IndyMac's deal with the FDIC really gives IndyMac no incentive to approve a short sale and your Seller carry back second may not want to take pennies on the dollar as a settlement.

I wrote this article for Sellers contemplating Short Sales: http://homebuysblog.com/2009/11/09/what-is-a-short-sale-can-…
Web Reference:  http://www.homebuysblog.com
0 votes
Heidi Golff, Agent, Ventura, CA
Tue Jan 19, 2010
Hello again,

There is a difference between the way a short sale is treated with regard to having a lender come after you. With a short sale, as long as it is purchase money, then you should be okay with “non-recourse” if you sell the home. If a lien is a home equity line of credit and used to purchase the home and you never again touched the equity line you are still okay. If you did a refinance on the first lien, then there is recourse; that lender can go after you in a short sale. If you paid money back to a home equity line of credit that was put into place initially to make the purchase, then later took money back out, the lender has recourse.

You didn't ask about short sales; you asked about foreclosure. If both loans are trust deed loans and not mortgages, you should not have to worry about anyone coming after you for the money. These are non-judicial foreclosures which almost all California liens are.

As always, seek legal advice. What we can give you here is never to be meant as a substitute for legal advice!! There are tax ramifications to all of this, too. Generally, you want to see and attorney and a CPA.
0 votes
M. King, , Greenville, SC
Tue Jan 19, 2010
It depends on the laws in the state where the property is located. This is a question for an attorney.
0 votes
Barry Shapiro, Agent, Camarillo, CA
Tue Jan 19, 2010
Hello Lbarill,

The 2nd lien holder would need to show up at the trustee auction and satisfy the 1st lien holder, meaning absorb that 1st mortgage and any past due balances. The deed of trust(s) you signed and notarized is/are secured by real estate - your home in Simi Valley. Therefore, the second is wiped out by virtue of the foreclosure, as they were a sub-ordinate lien. The 2nd is entitled to: Zilch, zero, nada. Adios numero dos!! (I just had lunch at El Pollo Loco, and may have had too much of that spicy salsa).
0 votes
Michelle Mor…, Agent, Lake Havasu City, AZ
Tue Jan 19, 2010
First off I am not an attorney, so you should consult an attorney first. I believe that a judgment creditor can require you to attend a deposition and give information about your income and assets.
The court can require you to give written information or testimony
about your income, assets, property, employer and Social Security
number. If a judgment is entered against you by a court, your wages or
bank account may be taken from you to pay the judgment. This is called
garnishment and attachment. The garnishment law allows the judgment
creditor to obtain a continuing writ of garnishment which orders your
employer to deduct money from your periodic wages until you have
paid off the judgment. Through a process called execution a creditor
can collect money owed under a judgment. The judgment creditor pays
a bond to the local sheriff to seize personal property owned by a
judgment debtor so that it can be auctioned and the proceeds applied
to pay the judgment."
You need to consult an attorney on this though.
0 votes
Heidi Golff, Agent, Ventura, CA
Tue Jan 19, 2010
If you go through a regular non-judicial foreclosure, (if the second trust deed to the seller is a Deed of Trust and not a Mortgage), then no, I don't believe he can go after you. Ask your attorney to be sure. If it is a judicial foreclosure, rare in CA, then yes...he may have recourse against. you. Again, ask your attorney.
0 votes
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