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Richard
Richard, Lawyer
Category: Real Estate Law
Satisfied Customers: 45720
Experience:  32 years of experience as lawyer in Texas. I'm also a Real Estate developer.
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In May 2005, I purchased a property with two loans, the first

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In May 2005, I purchased a property with two loans, the first in the amount of 71,945.00 and the second in the amount of 278,400.00. During this time of purchase, the housing market was at its’ all time high, and I had a stable and sufficient employment as a Sergeant in the United State Marine Corps. Due to the plummeting housing market values in 2007, I immediately attempted to sell my property. With several failed attempts, I requested approval for short sale, but still was unsuccessful in finding a buyer for the property. As I continued to struggle to sell this property, my contract with the Marine Corps was approaching rapidly with an end date of October 14, 2007. My contract with the Marines was near ending and I was unsuccessful in finding new employment, which caused me a detrimental lack of income. With the absence of employment, the several unsuccessful attempts to sell my property, I reluctantly decided to discontinue paying payments beginning September 2007. These circumstances lead to the property going into foreclosure.
I am now in the Air Force Reserves and because of this incident on my credit history, they have removed my security clearance. To regain my security clearance I must submit a letter that explains the situation with the circumstances as I explained to you. On my credit report, it only shows that I still have real estate debt for the first mortgage of 71,945.00 and not for the second mortgage of 278,400.00. It was brought to my attention that this was because of California laws that protect me from the second mortgage. I need some sort of legal documentation that I can attach to this letter and an explanation that can reinforce why I do not still owe the second mortgage. Hopefully you can help me with this. Thank you.
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Richard replied 1 year ago.
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. Were the proceeds of both loans used to purchase the property? Thanks.
Customer: replied 1 year ago.


Yes, that is correct.

Expert:  Richard replied 1 year ago.
Thanks so much for your reply. Then, both these loans are purchase money loans and non-recourse to you under California's non-deficiency statute. The specific California Civil Code is Section 580b which I have provided in full for you below so you can include it in your letter:


"California Code - Section 580b

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 the balance 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 the purchaser.

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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Customer: replied 1 year ago.


Can you please explain that part that pertains to my situation?

Expert:  Richard replied 1 year ago.
Sure....this specific section provides that when you obtain mortgage loans that are used for the purpose of purchasing your home, that the bank can only look to the property itself in the event of a default and that the bank cannot pursue you for the loan itself. Rather, the loan is nonrecourse to you....meaning that if you default, the bank can foreclose on the property, but that the bank can specifically not pursue you for any shortfall if the value of the property is not sufficient to pay the loan in its entirety.
Customer: replied 1 year ago.

OK I want to make sure that I am understanding this correctly since I am struggling with the legal jargon. Under this California's non-deficiency statute, The specific California Civil Code is Section 580b is the reason why the bank has not attempted to contact me on prepaying the second loan? I guess I am still struggling with the reason why the first is still on my record and the second loan has been cleared. If I put in the information about the non-deficiency statue, will that show that it is no longer my responsibility to repay the loan(s)?

Expert:  Richard replied 1 year ago.
No worries...it is exactly that....legal jargon. Neither loan is your responsibility. Under this Code Section neither lender can pursue you personally for these loans. Yes, if you reference this Code Section and provide the statute itself, that will indicate to them this is not your responsibility on both loans.
Richard, Lawyer
Category: Real Estate Law
Satisfied Customers: 45720
Experience: 32 years of experience as lawyer in Texas. I'm also a Real Estate developer.
Richard and 3 other Real Estate Law Specialists are ready to help you
Customer: replied 1 year ago.

OK thank you. When was this statue put into law? and is there a timeframe that it only applies to?

Expert:  Richard replied 1 year ago.
You're welcome...it's my pleasure. It was in place when you obtained these loans; it was actually enacted back in the 1930's. :)
Customer: replied 1 year ago.

Since its no longer my responsibility, what is the reason it still shows in my credit report? Is there any action I can take to have it removed? Or possibility a timeframe it is going to be removed on its own?

Expert:  Richard replied 1 year ago.
It should not show on your credit report. You can indeed dispute this with each credit agency. Once you dispute it, the credit reporting agency is required to investigate the dispute by sending it back to the creditor or collection agency for verification. If the creditor or collection agency verifies that the account is being reported correctly, the negative information will stay on your credit file. If the creditor or collection agency never responds to the investigation, then after about 30 days, the credit reporting agency must either delete the report from your file or report it as not being delinquent. If however they fail to do so, you will need to get a court order and then send the judge’s order to the credit agency to get it removed.
Customer: replied 1 year ago.


Do you know how I can get an official reference document of the California Code - Section 580b that you referenced?

Expert:  Richard replied 1 year ago.
Thanks for following up.....http://codes.lp.findlaw.com/cacode/CCP/3/2/8/1/s580b

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