Second mortgage sue foreclosure

I get a lot of people asking me if the second mortgage holder can sue you in foreclosure. Here's the deal.

There are two types of foreclosure. One uses the courts and is called judicial foreclosure. The other uses private trustees and is called non-judicial foreclosure. family_in_front_of_house.jpg

The thing about foreclosures is they are regulated by state law. And each state is a bit different. But here are two examples to discuss, Florida foreclosure and California foreclosure.

California is a non-judicial foreclosure state. They do have judicial foreclosure in California but they are not likely to pursue that against you in foreclosure except if you have a lot of other assets they want to go after and there is a good deal of money at stake.

Florida is a judicial foreclosure state.

A big difference is that in a judicial foreclosure situation, the end result of foreclosure is a court judgment. In non-judicial foreclosures, the lender has to go to court to get a judgment as the judgment does not happen from the foreclosure.

There are some things to keep in mind as to whether or not a lender can get a judgment against you after foreclosure. The judgment would be for deficiency, the difference between what the lender gets for the property and how much you owe.

Often, if you buy your property with a mortgage and that mortgage is your principal residence, the lender cannot get a judgment against you for the deficiency. This "purchase money mortgage" is a common exception for deficiency judgments.

Another common exception for deficiency judgments is non-judicial foreclosure. In California for instance, if a lender pursues a non-judicial foreclosure (which is normal there), they cannot get a judgment against you.

However, the big issue today is second mortgages. The second mortgage sue foreclosure issue. If the second mortgage holder does not foreclose, they can come after you later. They do so under a complaint in court called breach of contract. This would be very easy to prove and relatively inexpensive. And they can get a judgment against you for the amount of the loan and everything else, costs of foreclosure and court costs and attorney's fees because that is what you agreed to when you signed the note.

Will the second mortgage holder come after you later? I don't know. Nobody knows. My feeling is that they will. They will because why leave money on the table? There are several millions of second mortgages and someone will swoop down and buy those for a few cents on the dollar and go after the borrowers.

Is bankruptcy an option for second mortgage problems like this? It is. However, keep in mind that bankruptcy may involve a payback at least partially if you can't get a chapter seven discharge but must go for a chapter 13. The bankruptcy reform legislation that the lenders got Congress to pass a few years ago makes a complete discharge much harder to get.

You could conceivably be paying back your second mortgage loan for years from now.Blackvelvet3.jpg

I would suggest you purchase my Mortgage Relief Formula home study course and learn how to do a short sale and negotiate with the lender so they release you from future liability.

There is no assurance they will but you can be armed with information and increase your chances. I also show you how exactly to sell your home quickly, as in nine days, even in very hard hit areas such as Riverside or Florida. And I show you how to do a loan modification if you want to keep your home, and how to deal with credit card debts outside of bankruptcy. All my system methods are designed so they can increase your credit score over the longer run and get you out from under.

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6 Comments on Second mortgage sue foreclosure

Bert Lovitt @ 7:13 pm:

Can your short sale program be initiated after the bank has already filed for foreclosure?

Kirk @ 9:40 pm:

Can a secured second be forgiven after a short sale?

Frank M @ 9:08 am:

In a Florida short sale. If first (and only) lender says they will provide a "Release of lien and a Discharge of Mortgage" upon receipt of proceeds of the (short) sale, does that mean no further obligation? There is no mention of a promissory note. "Discharge of Mortgage" means "satisfaction" to my understanding. Is that true? Or, will they still be able to sue at a later date or sell the debt to a collector who will? I have not seen the final discharge document but I would argue that any language allowing further pursuit within such a document is deceptive.

I'd appreciate advice/thoughts

Nonya @ 1:17 pm:

You're WRONG re: California 2nd mortgages. If it's a purchase money 1st and purchase money 2nd, the 2nd lender cannot sue for deficiency once the 1st forecloses (as long as there have been no refinances). READ CCP 580b !! You're not telling people the whole truth. California is an anti-deficiency state.

Bizness @ 11:58 am:

If you're researching for CA properties go to www.HarleyFeinstein.com

He provides clear information and Use Case examples for CA properties and he confirms "Nonya's" comment above.

ron @ 6:01 am:

Thanks I enjoyed your information very much.
I would like to find an easy way to locate and buy discounted 2nd mortgages in the San Diego area. especlally those that are preforclosure. I am new at this and would appreciate any help.
Thanks,
Ron