Judicial Foreclosure in CA - Professor?

[MH_Sucker]

I just found out that our lender is pursuing judidical foreclosure on us. We have 2 loans in CA and they are both Purchase Money Loans with no refi involved. Why would they go this route? My understanding is that they can't pursue us for the debt in CA because of the purchase money issue. Is this not true? I am crossing my fingers for the short sale to go through......

[knownick]

Any other details? I assume the first thing he's going to do is ask you the usual questions - purchase date, loan amounts, lenders, etc etc etc...

[HopingtoFind]

Curious.... how did you find out that it is judicial foreclosure, do you have anything in writing that tells you that?

[kent302]

Below is Professor's reply to MH's question in earlier thread.
If the lender is starting to play hard-ball, you'd think they would agressively go after the recourse defaulters first. It seams to me suing non-recourse owners for deficiency is a quantum leap in effort with little chance of success. But with SHTF, anything may happen.

Are you sure the lender is not just threatening to sue?

-------------quote below----------------------
"Re: Regarding the second loan...

---

If your loans qualify for non-recourse treatment under CCP Section 580b, the lender's sole recourse is to foreclose on the property. In situations where there is no equity for the second lender (balance on the first loan exceeds the value of the property), the second lender is in a lose-lose situation. They could proceed to foreclose, but then would own the property subject to the balance owed on the first loan (effectively meaning they would own the property with negative equity). Alternatively they could choose to do nothing, eventually being foreclosed out by the first lender. Once they are foreclosed out, they are without a remedy since the debt is "non-recourse."

The key for you is to find an attorney skilled in California real estate law and debt collection practice and have your purchase and loan documentation reviewed to determine whether your loans fall into the non-recourse category. Know, as has been indicated in other postings on this site, that down the road that doesn't mean that the second lender won't attempt to collect. What it does mean is you have a defense to collection efforts, which is to point to the debt's non-recourse nature and let the lender know that if they continue to pursue collection efforts you will seek recourse based upon fair debt collection practices laws."

[The Professor]

MH_Sucker:

First of all, have you confirmed that the lender has actually started the process by filing a complaint in the superior court where the property is located? This can be confirmed in a variety of ways. Perhaps the easiest way is by checking the records at the recorder's office. If you will provide the identity of the county where the property is located, i can provide you with a website URL so you can determine is a lis pendens (notice of pending action) has been recorded.

The one situation I could see where a second lender on a non-recourse loan that is "underwater," effectively meaning it is unsecured, might sue is based upon a fraudulent loan application. Believe me these so-called liar's loans got their name for a reason. But there are clearly defenses to such claims, including the realistic possibility that the commissioned loan officer is the one who lied, having a borrower sign an incomplete loan and at a later time inserting alleged earnings.

I'll be interested in proceeding down a path that determines whether one of your lenders has really taken the steps towards a judicial foreclosure.

Daniel

[maxx233]

MH,
I'm very interested in hearing more details on this! It's the first time I've heard of a lender pursuing anything. Don't suppose there's any way you could attach the paperwork they sent, covering up/blacking out private details of course, so we could see? My guess is they're playing chicken with you. How long since your Notice of Default was filed? Has the sheriff sale already happened? I should be receiving my NoD in a couple weeks on a recourse refi'd loan in CA., will continue to document everything that happens with mine in a thread a created about a month ago that hasn't been updated because nothing's happened yet Good luck, and I hope they're just playing hardball. I'd hardball them back that you need to work something out or you'll simply be forced to file bankruptcy - not cheap or timely for them.

[MH_Sucker]

Ok, so I think that I panicked. The reason that I thought they were pursuing judicial was that on our credit report there is a line item that says the mortgage company has a judgement against us. So the first thing I did was come to loansafe on a break and made my post. After I made it, I realized that there was no way that they could have a judgement against us without us knowing it. So I apologize to everyone who responded for asking for information before I knew the whole story. Does anyone have any thoughts on this credit report line item? I called the lender and held for more than an hour and finally hung up. I am not sure how a company can report to the bureaus something that is not true. I suppose it is to cause someone to panic, which I did. I am going to dispute it. Has anyone else had issues with this kind of reporting?

Thanks to all that responded to my first post and again, sorry for the panic attack.

[maxx233]

lol, nice No worries, you had me surprised at least. I would wait for your foreclosure to go through and be done with, then bother to dispute it. For 1, it may just be a temp thing that goes away, or it may be part of the process (maybe it's a judgement for what you owe the lender that they've paid towards your property insurance/taxes) that they never expect to recoup but hit you with anyway, and in addition to all that - I'm not even sure I'd waste my time personally. That's part of the benefit of foreclosure to me - freedom from the bonds of my credit score. Once making the decision to let the house go I feel much more free.. I really don't give a rat's arse what that number is now - I've already accepted the fact that it's not going to be of any benefit to me for 7 years. I'll continue to pay bills and everything else and in time it'll go up no doubt on good behaviour, old problems will fall off my record, and any use I get out of it before 7 years is just simply a benefit I may not even pursue. But really - if you're foreclosing, do small things on there previous to foreclosure even really matter any more?