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LawGirl, Lawyer
Category: Real Estate Law
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Experience:  I am familiar with this area of law.
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We foreclosed on a house in California in September. It was

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We foreclosed on a house in California in September. It was our primary residence. Our first and second mortgage were both held by Bank Of america. We had a second mortgage of 86,000. We are getting calls from collectors now saying we still owe the money for the second, but if we can settle now it can be significantly reduced. We already put over 150,000 into the house so we don't want to put more into it, especially since it has already been foreclosed on. What do we do now?
What did you use the proceeds from the second mortgage for?
Customer: replied 6 years ago.
We put down 110,000 on the house since we wanted to put more than 20% down. We decided to borrow it back since it was a new build home with an unfinished backyard so about used about 50,000 for landscaping-concrete walls in the backyard, sprinkling system, concrete pads, etc. 30,000 of it was used for personal use (paid off car, etc)
I will opt out .... time constraints...and I don't want you to have to wait for me. I'm sorry!
Customer: replied 6 years ago.
Relist: he replied he did not have enough time to answer our question.
he replied he did not have enough time to answer our question
Thank you for your question.

Although I am an attorney, I cannot represent you. However, I will give you the most thorough information I am able.

Is it correct, than when you purchased the home you only had a first mortgage and you took out the second mortgage later? Is your second mortgage a HELOC? Was the home sold at a foreclosure sale? If so, for how much?

Edited by LawGirl on 11/15/2010 at 10:08 PM EST
Customer: replied 6 years ago.
yes when we purchased our home we had a first mortgage only. We took out a second a few weeks later. It is a HELOC. I don't know if it has been sold or not yet. Probably not. It was recently acquired by the bank. I think the exact date was oct 7, 2010

Thank you for your question.

To the extent that the bank took the property, whether it is sold for a value that satisfies the first mortgage is irrelevant, as a deficiency judgment cannot be taken against you for that amount. To the extent that the property sells for an amount that does not satisfy the second mortgage, you can be held responsible. Under California law, you cannot be held responsible for a deficiency judgment on a purchase money loan. These are funds that were used to purchase the property. Since the HELOC was taken out after purchase (albeit a few weeks after purchase), this is not considered purchase monies and the lender would likely have recourse against you.

You best case scenario may be to have the loan agreement for the HELOC reviewed by a local attorney to determine whether you can be held responsible for this loan. To the extent that you can be, you may consider offering the lender a settlement offer so you do not end up paying the entire amount.

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Customer: replied 6 years ago.
If the HELOC was used to make home improvements is it still the same answer?
Yes. To the extent that it is not purchase money (as the statute allows), then you look to the contract to determine what the lender's recourse. Standard verbiage will likely hold you responsible, even if the money was used to make home improvements.

I am sorry.
LawGirl, Lawyer
Category: Real Estate Law
Satisfied Customers: 4606
Experience: I am familiar with this area of law.
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