I purchased a home in 2006 for 350K and the loan comprised of a 1st at 275K and a 2nd at 75K. I lost my job and had to foreclose the property in DEC 2009 and the 2nd loan now appears on my credit report as open. I have been told by another Real Estate Attny that because the 2nd was secured at the same time initially with the 1st, the bank cannot legally recover the funds from the 2nd loan ($75K). My question is: Where can I get specific information regarding this legal language?
State/Country relating to question: California
I contacted a real estate attorney and was informed that legally, the bank cannot come after me to recover the funds. Because in this case, the funds were secured initally and basically used as a down payment.
But, I see on my credit report that the foreclosed 2nd loan is listed as still open and shows monthly delinquent payments.
I am currently disputing with agencies but will see what I can do. Thank You.
Hi - my name is XXXXX XXXXX X'm a Real Estate litigation attorney here to assist you.
The real issue is that IF the money you borrowed under both loans was used to pay the purchase price of the house (called "purchase money mortgage"), the lender does not have a right to seek to recover the debt from you because California does not allow deficiency judgments against a debtor for a purchase money mortgage.
Cal. Code of Civil Proc. 580(b) says:
No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of thebalance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by thepurchaser.
Where both a chattel mortgage and a deed of trust or mortgage have been given to secure payment of the balance of the combined purchase price of both real and personal property, no deficiency judgment shall lie at any time under any one thereof if no deficiency judgment would lie under the deed of trust or mortgage on the real property or estate for years therein.
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I appreciate your answer not only because it is a good answer in terms of how it affects my ability to recover and someday purchase a home again....but also because your reply was very quick and you included the necessary legal civil code. Thank You Very Much!
Glenn Earl Higa
California has very favorable laws for debtors who have lost their property to foreclosure. The anti-deficiency statute and the purchase money mortgage protection is certainly good for you in this instance.
Please let me know if you have any additional questions. Thanks!
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