This forum has a wealth of great information..thank you for sharing the knowledge. I hope I am posting this in the correct place.
I haven't seen our specific situation addressed but I'm hoping someone has the factual answers to our questions:
Our home is a primary residence in CA with a first and second mortgage, neither of which are purchase money mortgages. Both loans are with different lenders.
Home Value $180,000. First mortgage balance slightly underwater at $190,500. (not underwater enough to default or walk away.)
First mortgage is in good standing, no lates, no delinquencies, no intention of short selling or defaulting on the first.
The objective is to keep the home and service the first mortgage as is.
Second mortgage balance of $135,000. Delinquent for 1 year. Second mortgage would not negotiate and the loan has now been charged off and either turned over or sold (not sure which) to a collection agency.
According to the California One Action Rule and the clause requiring the first action "to be against the security," my questions are these:
1. Does the collection agency have to abide by the same rules as the Second Mortgage lender with regard to the One Action Rule - meaning that their first course of action must be against the security/property rather than filing for a deficiency judgment in pursuit of asset or wage garnishment?
2. If the collection agency must abide by the One Action Rule, what is the recommended response, if any, to their first written notification that if we dispute or want evidence of the debt we must respond in writing within 30 days of receipt of the letter or they will deem the debt to be valid?
Our game plan is to keep the first mortgage current, keep the home, and try to negotiate removal of the lien for the second mortgage with the original lender - not a collection agency, between now and the end of the 4 year statute of limitations from the first date of breech, which was one year ago.
If we cannot come to a satisfactory agreement for release of lien between now and the end of the statute of limitations, we are resolved to be OK with the fact that we can never sell the home, and we will have a lien on the home for the amount of the second mortgage no matter what.
We are also OK with the fact that if the second mortgage lender wants to foreclose within the next 3 years, so be it. Our bet is that the future value of our home versus the declining balance on the first mortgage, is not going to be enough to make it worth their while to foreclose. If it does, we're OK with that too.
Our main concern right now is how to answer and stop in their tracks, the collection agency that more than likely bought the paper for a couple cents on the dollar.
If anyone has verbiage to use in a response to the collection agency it would be greatly appreciated along with any clarity regarding the questions posed above.
Thanks so much.