Legal Question in Real Estate Law in California

Re: own 2 houses, need to foreclose 1

While the other attorneys presented the law aspect of your case, I am wondering why you don't sell the second house to reduce the losses incurred. Contact a reliable real estate agent and ask about the possibility of selling the second house.

Re: own 2 houses, need to foreclose 1

Probably, the general rule is that they can't seek a dificiency judgment based on a purchase money mortgage. So long as the foreclosure is pursuant to a purchase loan only, then your second property is likely safe.

Re: own 2 houses, need to foreclose 1

The previous post did not answer the question. Your question, as I understand it, is whether the bank can take the property you live on if you stop paying the mortgage on the other property. If this is not the issue, then please let me know and I will reanswer this question.

California has severe anti-deficiency legislation that protects people who are in default. The reason for all of this is to prevent another great depression, but that is another story.

If a lender, who I call the bank, forecloses, they have two options. They can foreclose judicially or non-judicially. If they foreclose nonjudicially, through the power of sale, they cannot obtain a deficiency judgment. A deficiency judgment is a judgment for the difference between the amount you owe and the amount that the property sells for.

The only way a lender could obtain a lien against the property you are living on, is if they file an actual lawsuit for foreclosure, and show to the court that the fair market value of the property that they foreclosed on (your other property) is not enough to satisfy the amount of indebtedness. This is almost unheard of in this day and age, and I have not seen an actual foreclosure action since the disco era.

E-mail me with any questions or concerns.

Very truly yours,

Re: own 2 houses, need to foreclose 1

If I understand the facts correctly, I would have to disagree with Mr. Brainard. Here are the facts about the two houses as I understand them:

House A. This house is rented. It is losing money for you on a cash-flow basis at present. You have a $100,000 line of credit secured by a deed of trust on this house. This is the house you are willing to have go into foreclosure.

House B. You are living in House B, which you bought using, in part, $50,000 borrowed from the House A line of credit. Your ex-fiance had promised to pay this $50K plus 2/3 of the on-going costs of House B. This is the house you are hoping you can keep without it becoming a second victim of the nasty business over House A.

If this is correct, then the $100,000 borrowed on the line of credit is NOT a purchase-money loan for either house. You may be vulnerable to a deficiency judgment. However, California's antideficiency laws go beyond excluding purchase-money loans. No foreclosure under a power of sale in a deed of trust is susceptible to a deficiency (with limited exceptions probably not applicable here), so the line-of-credit lender would have to sue for judicial foreclosure. Many lenders are unwilling for time and cost reasons to go this route, but one can never be sure. I'd say House B is at least at some risk. Sorry to be the bearer of bad tidings.

On the other hand, I would not hastily conclude that the ex-fiance is judgment-proof just because he is self-employed rather than employed, where you could garnish wages. You very well may be able to sue, win and collect your judgment from other assets.