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LawTalk, Attorney
Category: CA Real Estate
Satisfied Customers: 37855
Experience:  I have nearly three decades of legal experience, including Real Estate Law, and have held a Real Estate Broker's License.
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I recently was sold a commercial loan in second position on

Customer Question

I recently was sold a commercial loan in second position on my prinary residence. Was it legal for the broker to sell it or do I have legal grounds to have it stricken from title.
Submitted: 2 years ago.
Category: CA Real Estate
Expert:  LawTalk replied 2 years ago.
Good morning,
I'm Doug, and I'm sorry to hear of the confusion. My goal is to provide you with excellent service today. In order to give you a clear and concise answer, I will need some additional information about the circumstances, please.
1. Are you suggesting that you applied for a commercial loan and the lender, as security for the loan, took a second mortgage on your primary residence, as opposed to some other security interest?
2. What seems to be your concern, if the above supposition I make is accurate?
Customer: replied 2 years ago.
I applied for a second loan on my property but the broker sold me a commercial loan on my primary residence.
Expert:  LawTalk replied 2 years ago.
You applied for a second loan on what property?
What was the purpose of the loan---personal or business?
How many properties do you have and what are they used for?
Are you saying that the broker used your residence as security for a business loan made to you?
Customer: replied 2 years ago.
I only own one principal residence...condo. I applied for a second mortgage on it and the loan I was sold ended up being a commercial loan rather than a residential loan.
Expert:  LawTalk replied 2 years ago.
Good afternoon,
While it is not illegal to make a commercial loan and secure it with a private principal residence of the borrower, the loan would have to meet certain exemptions. Specifically, the loan would have to be made for a business purpose.
If your lender specifically gave you a business loan when you asked for a residential loan and the proceeds of the loan were not for a business purpose. If your loan is determined not to be for business purposes, then while you cannot avoid being obligated to pay the loan back, you almost certainly can avoid the lender from foreclosing on your property in the event of a default.
In other words while a court could order that the debt be removed from effecting your title to the property, the lender would still be able to pursue collection of the debt in the event of a default. The collection would be by way of a suit for breach of contract though, and not a foreclosure action.
You may reply back to me using the Reply link and I will be happy to continue to assist you until I am able to address your concerns, to your satisfaction.
Kindly, remember to rate my service to you. That is how I am credited for assisting you.
I wish you and yours the best in 2015,
Customer: replied 2 years ago.
I signed a disclosure staing that the proceeds were to be used only for a commercial purpose, however, the proceeds were used to pay off an existing residential loan on the same prooerty through escrow. So in effect the lender commited fraud. They also advised when I signed the papers that the only reasin it was termed business purposes is that that allowed them to charge a higher interest rate and points.
Customer: replied 2 years ago.
Where is expert?..I have more questions...