CA-2nd Mortgage Non-Recourse

This is a discussion on CA-2nd Mortgage Non-Recourse within the Mortgages, Refinancing, Foreclosure forum, part of the Buying & Selling Property category; I entered into foreclosure in 2008 on my house. The house was foreclosed and sold in 2008 by the bank ...

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Old Apr 17th, 2011, 11:27 AM   #1
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Question CA-2nd Mortgage Non-Recourse

I entered into foreclosure in 2008 on my house. The house was foreclosed and sold in 2008 by the bank to a new owner. On my credit report, both the 1st and 2nd were charged off as bad debt. According to the credit report, the balance on the 1st was listed as zero. and the balance on the second reads $76,811 even though it was charged off to bad debt. Home Loan Services First Franklin, where I did the borrowing from originally, has been bought by Bank of America. Yesterday, I get a letter from Select Portfolio Servicing, Inc. telling me that they are willing to settle the debt on the second mortgage if I send them $15,362.37 (which I don't have might I add) by June 24, 2011. It was my understanding that the second mortgage was a non-recourse loan because I live in California under the California Code of Civil Procedures section 580b, therefore allieviating me from the debt tied to this unfortunate outcome. The first and second mortgage were taken at the same time to make the purchase on the house. The documentation I have shows that the money went from the bank to the escrow company to the seller. Am I liable for this defaulted 2nd mortgage payment request at this time? If I am not, what do I need to say when I call or send to Select Portfolio Servicing, Inc. in order for them to dismiss their claim?
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Old Apr 17th, 2011, 05:24 PM   #2
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Default Re: CA-2nd Mortgage Non-Recourse

You are correct that in California one can obtain a deficiency judgment after foreclosures and sale on one to 4-unit residential dwellings. But that is for first mortgages only.

However, loans taken out after the home was purchased through a refinance or second mortgage can be subject to a deficiency judgment IF all the following conditions are met:

1. The lender forecloses under judicial proceedings (California Code Civil. Proc. 726).

2. There is a 3-month limit for actions for deficiency judgments under a judicial foreclosure.

3.If the second mortgage is hard money and the lender has lost security for that loan through a foreclosure or short sale -- making the security for the promissory note worth nothing -- the beneficiary of that second mortgage can pursue a deficiency judgment (Roseleaf Corp. v. Chierighino, 59 Cal. 2d 35 (1963).
  • SB 931, effective Jan. 1, 2011, offers deficiency protection to California short sale sellers if the loan is in first position. It does not apply to foreclosures.
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Old Sep 7th, 2011, 09:30 AM   #3
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Default Re: CA-2nd Mortgage Non-Recourse

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Originally Posted by Friend In Court View Post
You are correct that in California one can obtain a deficiency judgment after foreclosures and sale on one to 4-unit residential dwellings. But that is for first mortgages only.

However, loans taken out after the home was purchased through a refinance or second mortgage can be subject to a deficiency judgment IF all the following conditions are met:

1. The lender forecloses under judicial proceedings (California Code Civil. Proc. 726).

2. There is a 3-month limit for actions for deficiency judgments under a judicial foreclosure.

3.If the second mortgage is hard money and the lender has lost security for that loan through a foreclosure or short sale -- making the security for the promissory note worth nothing -- the beneficiary of that second mortgage can pursue a deficiency judgment (Roseleaf Corp. v. Chierighino, 59 Cal. 2d 35 (1963).
  • SB 931, effective Jan. 1, 2011, offers deficiency protection to California short sale sellers if the loan is in first position. It does not apply to foreclosures.
I don't get this answer. I don't see how it addresses the above question. CA has non-deficiency statutes when loans are used to purchase the home. Their questions were, are they liable for the 2nd and what do they say to the loan servicing co. My question would be do they have the right to report a non-recourse debt to credit company. I would appreciate your expertise as soon as possible, as we are going thru exactly the same thing. Thank you in advance.
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california code, california foreclosure, california mortgage laws, civil procedures, non recourse debt, property law

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