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I live in CA and my home was foreclosed back in March 2010. I had two mortgages, each with principal balances representing purchase money only. However, I did refinance my 2nd mortgage once to a lower interest rate but with no cash out such that my principal balance always remained equal to the purchase money.

The 1st mortgage holder foreclosed in March 2010. Since then, the 2nd mortgage holder and later, two different collection agencies have been calling me for payment on the 2nd. CA is a non-recourse state. Nothing in my 2nd mortgage contract or Deed of Trust indicates that my 2nd mortgage loan turned from being a non-recourse loan for purchase money under CA law into a recouse loan when I refinanced to a lower rate. The bank and the collection agencies apparently feel otherwise.

Q: Do they (the bank and/or collection agencies) have recourse to pursue me for a deficiency on the 2nd mortgage? Please advise.

smithsussane · Posted: Tue Sep 21, 2010 8:08 pm Post subject:

Hi Silverback!

Welcome to forums!

It is true that after the refinance, your mortgage does not remain a purchase money mortgage and thus it is not a non-course loan. The second mortgage lender has charged off the account and now you will be liable for paying the balance dues. The collection agency will come after you for collecting the balance amount.

Feel free to ask if you've further queries.

Sussane

Guest

Thanks Sussane for the info. Wow, I reviewed my 2nd mortgage docs and the Deed of Trust, and the only recourse mentioned in the event of default is foreclosure, nothing else; no mention of pursuing a deficiency etc.

What exactly does it mean that the bank charged off the loan? Does that mean they do not expect payment and that they've given up pursuing me for payment? The collection agency always mentions trying to collect on behalf of the bank but does the bank still have an interest in the loan after charging it off or is it just the collection agency with an interest in the loan? What actions can I expect the collection agency to take from here and, given that I certainly don't intend to pay because I don't have a house or the money, how should I deal with them?

smithsussane · Posted: Tue Sep 21, 2010 11:09 pm Post subject:

Hi Silverback!

Welcome to forums!

Charge off means that the bank has declared the debt amount will not be collected. He has declared it as a loss. However, normally the lender will assign the account to a collection agency. The collection agency will in turn collect the dues from you. They might harass you for the payments. You will have to negotiate with them and get a payment plan to pay off the dues.

Feel free to ask if you've further queries.

Sussane

Guest

Many collection agencies on 2nd mortgages have a WIDE settlement authority due to the asset being lost. I'd call in with 10-20% ready to pay and only deal with them as a full settlement situation.

Guest

hi. 2 yrs ago i short saled my house in Ca. just the last few months a collection agency is harrassing me to pay a balance deficiency on my 2nd mortgage. it was my primary residence & i never refinance my 2nd, so isn't it a non-recourse loan? Do they have the right to pursue this balance deficiency? what should i do? from $90,000 now they are requesting $10,000. Can they sue me or garnish my wages?

Guest

Even after they charge the loan off they will sell the loan as part of a portfolio for pennies on the dollar to another financial institution or collection agency and try to collect. I had a foreclosure in the late 90s and the second loan holder charged the loan off I had to pay taxes on this as part of my income. Since then they have sold the loan over 3 times and each one wants full payment. All I do is ignore them. Then the calls stop and no more notices in the mail. They will report to credit agencies. They have threatened legal action but never followed through. I guess the statute of limitations ran out on this. What is the status of limitations on this? Why can they continue to sell the bad loan over and over? Buy a bad loan that is insured or hedged so they do not lose money then sell it again so they make money on both ends, take the benefit of a charge off. Accounting rules here are what? Nonexistent? The whole mortgage securitization system is screwed up beyond belief. How can they prove you actually owe them the money? All they do is send you a notice with a date and amount. Do they have documentation? All they are doing is passing on the hot potato to another institution and making some money in the process. The best thing to do is wait for the summons if they are serious to take you to court. IF you pay them anything that means you acknowledge you owe them the money and the process starts all over.

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