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Loren
Loren, Attorney
Category: Legal
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Experience:  30 years experience representing clients.
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My mortgage company foreclosed on my house and bought the house

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My mortgage company foreclosed on my house and bought the house at the foreclosure sale.They then subsequently reinstated the loan. They charged exorbitant legal fees and repayment to catch the loan up (to the tune of $20,000) The sheriff came to my house and said that I had to vacate within the week previous to the reinstatement. I had a home equity loan by the same company and after they reinstated the loan the home equity branch is taking me to court for their money. My question is did the mortgage company assume that loan when they purchased the house at the foreclosure sale? and shouldnt that have been added into the amount I was charged to bring the house current? This is in the state of Georgia

Thank you for using JustAnswer. I am JudgeLaw and I will do whatever I can to answer your question and provide excellent service.

I am sorry to hear of your dilemma.   I realize how frustrating this is for you and I hope to provide you information which is accurate and useful, even though it may not be the news you were hoping to get.

When a first mortgage forecloses it wipes out the lien of any junior lenders, but it does not erase the repayment obligation. In other words, the foreclosure would cancel the home equity lender's right to the collateral ( your property) which just makes it an secured loan, like a credit card. The note, or IOU, of the home equity loan is not cancelled, however, and that remains as an unsecured loan to be repaid.

Some states, such as California, prohibit a second action to repay the home equity loan if the same bank made both loans and both were for the purchase of the property. Essentially, they are treated as one loan. Georgia doe not currently offer that protection.

I am sorry. I realize this is not the answer you were hoping for. As a professional, however, I am sometimes placed in the position of having to deliver news which is not favorable to a customer's position, but accurately reflects their position under the law. I hate it, but it happens and I ask that you not penalize me for having to deliver less than favorable news.

It is my privilege to assist you. Let me know if you need further information.  I hope I have helped you beyond your expectations in the service I have provided to you.  I am here for you.

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Thank you.

JudgeLaw
Customer: replied 3 years ago.

Are you saying that they cannot come after the house? What does wipes out the lien of any junior lenders mean? Is this type of loan eligible for filing bankruptcy on?

It means that the foreclosure of the first mortgage wipes out the right of the second mortgage to foreclose. They no longer have any right to the collateral. They can, however, still sue to be repaid. The loan is no longer secured by the house anymore.

Yes, it can be scheduled for discharge in bankruptcy.

Thank you.

JudgeLaw
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