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I was living in California from 2005 to July 2009. I purchased

Customer Question
a home in November 2005...
I was living in California from 2005 to July 2009. I purchased a home in November 2005. I had a first and second mortgage that was used for the down payment. In November 2008 my division was going to be outsourced and I was going to be out of a job in July 2009. The funding was used to move my belongings back to MI. I foreclosed in April of 2009 and moved to an apartment in May of 2009 (I was still employed). I left my job in July and started a new position in September in MI. Question: I am being told that the second mortgage does not go away because I am no longer a resident. Shouldn't the 2nd go away immediately when I foreclosed? And after foreclosure do they expect you to stick around in CA if you don't have a job.
Submitted: 7 years ago.Category: Real Estate Law
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Answered in 25 minutes by:
12/1/2010
Real Estate Lawyer: Law Pro, Lawyer replied 7 years ago
Law Pro
Law Pro, Lawyer
Category: Real Estate Law
Satisfied Customers: 24,870
Experience: 20 years extensive experience in real estate law, foreclosure, finance, and landlord tenant law.
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Tthe junior loan or the second mortgage can come after you. They can go to court under a breach of contract claim just like a credit card company can.

It's an unsecured debt after the foreclosure was done at this point.

You have the usual defenses to it but usually those aren't much so they can force the issue eventually by filing for a summary judgment motion, getting a judgment and then garnishing wages, levying on bank accounts, or whatever.


This second mortgage situation is a huge deal. California is a "non recourse" state but that only applies to the first mortgage in most cases.

 

As many people are finding out, just about everywhere under current conditions, borrowers can be held personally liable for second mortgages after foreclosure has happened on the first mortgage.


Sorry.







Please click on the ACCEPT button for my answer so that I receive credit for assisting you (even if you placed a deposit or have a subscription program). You may continue to ask follow-up questions after accepting. If the information is helpful, I would very much appreciate positive feedback. Bonuses are also appreciated. If you do have a follow-up question, press REPLY, NOT relist, or else I won’t receive the question.
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Customer reply replied 7 years ago
This is why I did not accept your answer also read mu question....about residence...

THE PURCHASE MONEY RULE: In California, a lender who loaned you money to BUY your home, which you ORIGINALLY moved into as your primary residence, cannot do anything other than foreclose. This means if the foreclosure sale does not pay all “purchase money” loans, those lenders cannot sue you for the unpaid balance. Most importantly, this includes second mortgages used in many 80/20 100% financing deals.

California foreclosure procedures provide that any secured creditor who uses the power of sale in a deed of trust to conduct a foreclosure sale gives up any claim against the borrower for a deficiency. So, a creditor who chooses a quick and relatively cheap non judicial foreclosure cannot pursue the property owner for more money after the sale.

The thinking behind this provision of California law is that in non judicial foreclosure (one not involving the court), there is no assurance that the foreclosing creditor is getting the property’s value at the foreclosure auction. It would be manifestly unfair for the creditor to bid $10 at the public auction, get the house and then chase the borrower for the balance.

Real Estate Lawyer: Law Pro, Lawyer replied 7 years ago
Are the 1st and 2nd the same lender?

Too, how is the 2nd loan stated? Are you sure it's a purchase money loan as per the docs?


Edited by Law Pro on 12/6/2010 at 5:58 PM EST
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Customer reply replied 7 years ago
Yes, borrowed at the same time for the down payment. They are now coming after me telling me that I was not a resident in CA during my foreclosure. Which I was, from 2005 until 2009. I actually was paid to leave the house. The collection agency said they need proof...lease of an apartment...letter from the employer....My division was outsourced to a Canadian company and my last day of employment was July 2009. We foreclosed in March of 2009 and received an eviction notice in May...I was still their moving my belongings out. I signed for certifed mail during this time and the realestate representing WAMU who switched over to Chase made me the offer to move out.So they have records. After the foreclosure I questioned the second loan and I was told it was taken care of and they would send me a letter. A year later another collection agency called and I supplied them copy of the first and second loan and never heard from them again. When I called Chase they have no paper work on the second loan and the collection agency is asking me for all these documents.

Real Estate Lawyer: Law Pro, Lawyer replied 7 years ago
When exactly did you leave CA - November 2008?
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Customer reply replied 7 years ago
No, I left in the middle of July 2009 when my job ended, the foreclosure papers where sent to me in January 2009 and the actual auction was sometime in the latter part of March of 2009. I was offered another position in Michigan starting in September of 2009. That is why I left did they expect me to stick around for a while? Plus I had no job and living in an apartment for a month and a half. Also I was told that you needed to be resident for two years before you can foreclose.I don't think WAMU would have granted me a foreclosure if I just got up and left. I was in the house for almost 4 years.

The docs. that I have says principal amount of loan from WAMU xxxxxxx. And on the same paper work right below it states the same principal amount of loan from WAMU xxxxxxx.

On another set of docs it shows 1st mortgage xxxxxxxxxx plus closing cost
and on the second set of docs it shows sub financing.xxxxxxx and below it New second mortgage closing cost xxxxxxx

Which shows the calculation and the total down payment needed including my deposit and the amount of the second loan.
Customer reply replied 7 years ago
Should I send the collection agency any documents that they requested?
Real Estate Lawyer: Law Pro, Lawyer replied 7 years ago
OK, it would appear then that both the 1st and 2nd were purchase money loans, that you didn't abandon the property - they are mischaracterizing the foreclosure and your liability.

You don't have liability for the foreclosure personally under the circumstances and time of the matter as you described.

What documents specifically are they requesting?

This is a collection agency pursuing this debt?
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Customer reply replied 7 years ago
Yes, it is a collection agency....the third one since I foreclosed.

They are asking for any type of paper work showing I was still in CA during this time.


I am sending them lease agreement of apartment which shows me leasing the apartment on May 9th leaving the apartment on July 15th 2009 and a truck rental agreement the day I was moving the belongins out of the apartment, a fax letter from the real estate representative dated June 9th regarding my W9 form for the money they paid me to get out of the house and eviction papers that where delivered to the house and signed for...... I was still in the home till the end of May. As a bonus I was going to send them the good faith estimate that was given to me showing the two loan when I purchased the house at the end of November of 2005.
Real Estate Lawyer: Law Pro, Lawyer replied 7 years ago
Have demanded that to see what information and law they are relying upon when the loans were were purchase money loans?

I think you should take the reverse position at this time and demand that they provide you with proof otherwise that your obligated potentially in the matter.

All I would send them is a copy of the Good Faith Settlement Agreement - that's it.

I would inform (in writing by certified mail) them that you want verification of the contract pursuant to the Fair Debt Collections Practices Act and copies of all statements showing a default.

That if they contact you again without having provided the requested information you will file suit against them for violation of the FDCPA.

Too, that if they file suit in the matter - that after you win the case you will thereafter file a malicious prosecution suit against them.

Get the collection agent's name, address, company, reference number and telephone number and then send off the letter to them by certied mail.

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Customer reply replied 7 years ago
I think you should take the reverse position at this time and demand that they provide you with proof otherwise that your obligated potentially in the matter.

Okay, so I will send them a copy of the Good Faith Settlement Agreement - that's it.

I would inform (in writing by certified mail)

I would write them:

I am requesting that you send me verification of the contract pursuant to the Fair Debt Collections Practices Act and copies of all statements showing a default. Wouldn't they just send me statement of the missing payments?
(should I mention anything about California purchase money loan?)

That if you contact me again without having provided the requested information I will file suit against you for violation of the FDCPA.

Also, if I should file suit in the matter - that after I win the case I will thereafter file a malicious prosecution suit against you.

Enclosed is a copy of a Good Faith Settlement Aggrement.

Sinserely,
Real Estate Lawyer: Law Pro, Lawyer replied 7 years ago
You want copies of everything - you don't want to make their life easy but very difficult and make them work before they contact you again.

That's all I would send them in the matter.

I don't think they will contact you again in the matter.

That they won't be able to provide the documentation at all - but it would be required before they can contact you again.
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Customer reply replied 7 years ago
Last question... is the letter that I wrote okay and what type of copies would they be sending me or required to send me.
Real Estate Lawyer: Law Pro, Lawyer replied 7 years ago
What does a debt collector need to provide as debt validation?

* Proof that the collection company owns the debt/or has been assigned the debt. (Bob is legally entitled to collect this particular debt from you.) This is basic contract law. It is very difficult to get a judgment without a direct contract between collection agency and the original creditor.
* At a minimum, some account statements from the original creditor. If you really want to get sticky, you can pin them down on the amount of the debt by requiring complete payment history, starting with the original creditor. (How the heck did Bob calculate this debt? What fees/interest Bob has tacked on to this debt and how he determined these fees?) This requirement was established by the case Fields v. Wilber Law Firm, Donald L. Wilber and Kenneth Wilber, USCA-02-C-0072, 7th Circuit Court, Sept 2004..
* Copy of the original signed loan agreement or credit card application. (Your contract with Joe establishing the debt between you.) However, account statements from the original can fulfill these requirements.


Here's a good sample letter to send:

Under the Federal Debt Collection Practices Act, you are allowed to challenge the validity of a debt that a collection agency states you owe to them. Use this letter and the following form to make the agency verify that the debt is actually yours and owed by you. Keep a copy for your files and send the letter registered mail.

Your Name
XXXXXAddress
Your City, ST 01234

ABC Collections
XXXXX
Chicago, IL

Date:

Re: Acct # XXXXX

To Whom It May Concern:

This letter is being sent to you in response to a notice sent to me on September 30, 2002). Be advised that this is not a refusal to pay, but a notice sent pursuant to the Fair Debt Collection Practices Act, 15 USC 1692g Sec. 809 (b) that your claim is disputed and validation is requested.

This is NOT a request for “verification” or proof of my mailing address, but a request for VALIDATION made pursuant to the above named Title and Section. I respectfully XXXXX XXXXX your offices provide me with competent evidence that I have any legal obligation to pay you.

Please provide me with the following:

  • What the money you say I owe is for;
  • Explain and show me how you calculated what you say I owe;
  • Provide me with copies of any papers that show I agreed to pay what you say I owe;
  • Provide a verification or copy of any judgment if applicable;
  • Identify the original creditor;
  • Prove the Statute of Limitations has not expired on this account
  • Show me that you are licensed to collect in my state
  • Provide me with your license numbers and Registered Agent

    At this time I will also inform you that if your offices have reported invalidated information to any of the 3 major Credit Bureau’s (Equifax, Experian or TransUnion) this action might constitute fraud under both Federal and State Laws. Due to this fact, if any negative mark is found on any of my credit reports by your company or the company that you represent I will not hesitate in bringing legal action against you for the following:

    • Violation of the Fair Credit Reporting Act
    • Violation of the Fair Debt Collection Practices Act
    • Defamation of Character

    If your offices are able to provide the proper documentation as requested in the following Declaration, I will require at least 30 days to investigate this information and during such time all collection activity must cease and desist.

    Also during this validation period, if any action is taken which could be considered detrimental to any of my credit reports, I will consult with my legal counsel for suit. This includes any listing any information to a credit reporting repository that could be inaccurate or invalidated or verifying an account as accurate when in fact there is no provided proof that it is.

    If your offices fail to respond to this validation request within 30 days from the date of your receipt, all references to this account must be deleted and completely removed from my credit file and a copy of such deletion request shall be sent to me immediately.

    I would also like to request, in writing, that no telephone contact be made by your offices to my home or to my place of employment. If your offices attempt telephone communication with me, including but not limited to computer generated calls and calls or correspondence sent to or with any third parties, it will be considered harassment and I will have no choice but to file suit. All future communications with me MUST be done in writing and sent to the address noted in this letter by USPS.

    It would be advisable that you assure that your records are in order before I am forced to take legal action. This is an attempt to correct your records, any information obtained shall be used for that purpose.

    Best Regards,

    Your Signature
    Your Name





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    Customer reply replied 7 years ago
    WoW!!! I will use the letter. You have been very helpful and I "accept your answer" and it is already charged to my american express.

    Once again thanks.

    How do I get in touch with you if I need other legal advice?
    Real Estate Lawyer: Law Pro, Lawyer replied 7 years ago
    Thanks for the thought. Please ask for me, "Law Pro", if you have any further questions on this issue.
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