Home Loans and Support

2nd Mortgage Demanding Payment in Full

Discussion in 'Foreclosure Laws' started by crush67, May 12, 2010.

  1. crush67

    crush67 LoanSafe Member

    Hi, i'm in LA California. I had an 80/20 with two different banks to purchase a condo in 2005. i did not refi or modify the original loans in anyway. the 80 foreclosed on the condo in November 2009. they did not recoup enough to pay anything on the 20 (second loan), in fact they did not get nearly what i owed them. thus, the 20 got zip from foreclosure.

    the 2nd loan just sent me a letter stating that i have to pay them 67k, saying that the account has been accelerated.

    i was on the understanding that purchase money loans in California were non recourse, and that i would not have to pay the second loan?

    what should i do?

    do i have to pay the 67k, or do i send them a letter explaining that the loan was purchase money / non recourse

    - will that be enough to stop them coming after me?
  2. Daisy Cutter

    Daisy Cutter LoanSafe Member

    LOL

    If I were you I would take a copy of their demand letter and print out a definition of California civil code 580b. I would use a pink highlighter on the No deficiency judgement part. Then I would send that letter back to their return address, copying your state senator and assembly person, and Jerry Brown California AG.

    That should take care of it, and if you get lucky one of these politicians will make a huge deal out of it. These banks are all extremely aware that purchase money is deficiency-proof in California.

  3. pookey

    pookey LoanSafe Member

    Daisy Cutter is right on - you are protected by 580(b) if it was your primary residence and the loans were both part of the purchase money.

    Do what she suggests and they should go away.
  4. crush67

    crush67 LoanSafe Member

    Hello Daisy, thanks for taking the time to reply. I like the idea of copying the senator, and attorney general. I'll modify my response to include these. My current letter looks like this: I got it off this site from a professor shay reference.

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<w:LsdException Locked="false" Priority="37" Name="Bibliography"/> <w:LsdException Locked="false" Priority="39" QFormat="true" Name="TOC Heading"/> </w:LatentStyles> </xml><![endif]--><style> <!-- /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:1; mso-generic-font-family:roman; mso-font-format:eek:ther; mso-font-pitch:variable; mso-font-signature:0 0 0 0 0 0;} @font-face {font-family:Verdana; panose-1:2 11 6 4 3 5 4 4 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:536871559 0 0 0 415 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Times New Roman","serif"; mso-fareast-font-family:"Times New Roman";} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-size:10.0pt; mso-ansi-font-size:10.0pt; mso-bidi-font-size:10.0pt;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} --> </style><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} </style> <![endif]--> [FONT=&quot]Cc: Attorney General Edmund G. Brown, Jr., Senator Alan Lowenthal, Assembly Member Bonnie Lowenthal.<o:p></o:p>[/FONT]
    [FONT=&quot]<o:p> </o:p>[/FONT]
    [FONT=&quot]Dear Bank:

    I am in receipt of the attached letter, which frankly confuses me. The debt you reference was a secured loan on my former [ADDRESS] residence. I say "former" because I no longer own it because the first lender foreclosed on the home. While I suspect you already know the applicable law here in California relating to limitations associated with the second secured lender's sole remedy, I suggest that you should be mindful of the language in California Code of Civil Procedure Section 580b, which prohibits deficiency judgments with limited exceptions where “purchase money†securities are involved. For this purpose, “purchase money†means a third-party lender advancing funds to a buyer to be used to pay all or part of the purchase price of a dwelling of not more than four units to be occupied in part or entirely by the buyer.

    Given that the proceeds of the loan in question were used to pay part of the purchase price of my former [ADDRESS] residence, I suggest that there is simply no debt owed since the creditor failed to exercise their sole remedy of foreclosure. I must insist that you immediately cease any and all collection activity or any other actions that impair my reputation and creditworthiness. If you fail to do so, I will have no choice to exercise my rights and remedies, both under Federal Fair Debt Collection Practices laws, and similar California state laws.<o:p></o:p>[/FONT]

    [FONT=&quot]<o:p> </o:p>[/FONT]
    [FONT=&quot]I am copying this letter to my Attorney General Edmund G. Brown, Jr., my Senator Alan Lowenthal, and my Assembly Member Bonnie Lowenthal. <o:p></o:p>[/FONT]
    [FONT=&quot]<o:p> </o:p>[/FONT]
    [FONT=&quot]I think it is important they see firsthand how banks are continuing to apply pressure and threats to the victims of foreclosure in California!

    Sincerely,<o:p></o:p>[/FONT]
  5. crush67

    crush67 LoanSafe Member

    thanks for the replies, i tried to post this once already so i hope i don't double post. i really like the ideas of ccing the attorney general and senate. this is my response, i got the letter from this site, i think professor shay.

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{font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:-1610611985 1107304683 0 0 159 0;} @font-face {font-family:Verdana; panose-1:2 11 6 4 3 5 4 4 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:536871559 0 0 0 415 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Times New Roman","serif"; mso-fareast-font-family:"Times New Roman";} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-size:10.0pt; mso-ansi-font-size:10.0pt; mso-bidi-font-size:10.0pt;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} --> </style><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} </style> <![endif]--> [FONT=&quot]Cc: Attorney General Edmund G. Brown, Jr., Senator Alan Lowenthal, Assembly Member Bonnie Lowenthal.<o></o>[/FONT]
    [FONT=&quot]<o></o>[/FONT]
    [FONT=&quot]Dear Bank:

    I am in receipt of the attached letter, which frankly confuses me. The debt you reference was a secured loan on my former [ADDRESS HERE] 90804 residence. I say "former" because I no longer own it because the first lender foreclosed on the home. While I suspect you already know the applicable law here in California relating to limitations associated with the second secured lender's sole remedy, I suggest that you should be mindful of the language in California Code of Civil Procedure Section 580b, which prohibits deficiency judgments with limited exceptions where “purchase money†securities are involved. For this purpose, “purchase money†means a third-party lender advancing funds to a buyer to be used to pay all or part of the purchase price of a dwelling of not more than four units to be occupied in part or entirely by the buyer.

    Given that the proceeds of the loan in question were used to pay part of the purchase price of my former [ADDRESS HERE] residence, I suggest that there is simply no debt owed since the creditor failed to exercise their sole remedy of foreclosure. I must insist that you immediately cease any and all collection activity or any other actions that impair my reputation and creditworthiness. If you fail to do so, I will have no choice to exercise my rights and remedies, both under Federal Fair Debt Collection Practices laws, and similar California state laws.<o></o>[/FONT]

    [FONT=&quot]<o></o>[/FONT]
    [FONT=&quot]I am copying this letter to my Attorney General Edmund G. Brown, Jr., my Senator Alan Lowenthal, and my Assembly Member Bonnie Lowenthal.
    <o></o>[/FONT]
    [FONT=&quot]<o></o>[/FONT]
    [FONT=&quot]I think it is important they see firsthand how banks are continuing to apply pressure and threats to the victims of foreclosure!

    Sincerely<o></o>[/FONT]
  6. cclee

    cclee LoanSafe Member

    You know, it seems that the departments just don't talk to each other, I continued to get calls and letters from my non-recourse 2nd after the 1st foreclosed, even received the 1099c checked "not personably liable" and still was getting calls, I was finally able to answer one day (they call when i'm at work) and told the woman that it was non-recourse etc. and she said ok, they looked into it and that was that, she was very nice about it also. Sometimes you just need to contact them like Daisy said.
  7. crush67

    crush67 LoanSafe Member

    thanks for the votes of confidence, i've been worried sick about this letter.

    i plan on sending out my replies to the bank and senate etc. today. i'll post back any news, in the hope that my experience will help someone else.
  8. crush67

    crush67 LoanSafe Member

    cclee, when did your foreclosure happen, what was your story?

    did you need to get an attorney to help you through the foreclosure process and to get the banks off your back or was your phone call enough.

    i'm wondering if i should get an attorney, or just wait to see what happens until after i send my letter.
  9. cclee

    cclee LoanSafe Member

    We started our walk March of 09, made last payments to both 1st and 2nd Feb 09, never talked to anyone that called, both loans were non-recourse. The first foreclosed on 9/28/09, got my 1099-A in Feb. 10' also checked "not peronably liable", then got the 1099-C from the 2nd at the end of Feb 10', same wording.. this is the box that should be checked if your loan is non-recourse. I started getting calls from the 2nd maybe 2 mo's after the foreclosure, sounded like they had just transferred it to their inhouse collections dept., also received letters asking for payment in full or 20%, received 1 of each. I thought maybe it took some time for them to get it off their books after the 1099's go out, so gave it another month. Finally able to answer the phone one day and told the young woman calling that it was non-recourse and she checked into, it had said on my credit report that it was in the collections dept, I checked a few weeks after talking to her and now it says the account is closed and no other collection actions to be taken.. something along that line. There was another poster on here going thru the same thing, he said he just picked up the phone and talked to the cust. service rep who also checked into it and he was with it at that time, that's what made me think they just don't communicate and so I talked to them.
  10. crush67

    crush67 LoanSafe Member

    thanks cclee

    i stopped paying march 09, the first forelcosed in nov 09. i got a 1099a from the 1st but the box was checked saying i was personally liable. i called them up, the rep told me that the box had to be checked, even though she said my loan was non recourse. i explained that it made no sense, how can i be both liable and not liable? i called the tax people and explained this, they said the banks get it wrong all the time.

    what's been particularly annoying for me, is that there is nothing to state in the loan docs that the loan is non recourse or not. the IRS said to me to send them something that shows the loan is non recourse, but how do you do this if there's nothing written in any of the documents? it's all vague, and frustrating. it seems the only thing to go on is the 580b code statement.

    FYI i did not get a 1099c from the 1st. i got no 1099's from the 2nd - just this letter the other day demanding i pay in full.

    i guess this will be haunting me all year! and then i guess there will be more headaches with tax forms next year.

    such a mess.
  11. gz9gjg

    gz9gjg LoanSafe Member

    Just a reminder that this can happen to anyone.

    Don't keep your checking or savings account at the same bank as you have a loan at.

    Some banks will "accelerate" the loan and drain your account.

    Also don't use ACH to pay your bills, allowing your creditors to take your payments automatically. ACH is only a set of rules and you are not well protected if a creditor takes too many payments, wrong amount, etc. Your bank does protect you if you use their Bill Pay system to send payments.

    Good luck . . .
  12. cclee

    cclee LoanSafe Member

    Crush, i'd do what Daisy said to do and send a letter stating it was non-recourse with a copy of the 580b code and go from there, it may just be as easy as that. I only received a 1099a from the 1st as I believe that is what most get with the 1st.
  13. leftyaz

    leftyaz LoanSafe Member

    Crush any update? Did the letter take care of it?
  14. crush67

    crush67 LoanSafe Member

    Hi leftyaz, so far i have not heard back from the bank or anyone else for that matter in regard to my specific loan.

    I did get a generic type letter from the second bank saying to contact one of their branches to work out any issues, but it was not in direct reference to the loan in question so i simply treated it as junk mail.

    in summary i'm still waiting to hear back... i just wish it would all be over with so i could move forward without having to keep looking back over my shoulder!

    are you in a similar situation?
  15. leftyaz

    leftyaz LoanSafe Member

    Crush,
    I'm not in that situation (yet) but fear it daily! I am in AZ. My house is set to be auctioned in a month. I have gone back and forth with the idea of hiring an attorney, even posing the question here on the forum. I also had an 80/20 and live in a non-recourse state. The 20 was purchase money also and I have heard numerous stories of banks trying to collect on that debt after the foreclosure. Most of the time, it is not within their legal right to do so and they try anyway. I have heard that those loans are being sold to collection agents who try to get them paid as new loans and to steer clear of that.
    I have the name of an attorney here in AZ that I am likely going to go see just for peace of mind if nothing else. I will keep you posted and let you know any pertinent info he has on that subject.
    Keep us posted!
  16. crush67

    crush67 LoanSafe Member

    I just checked my credit report with Experian. My score is 728, the foreclosure happened Nov 2009.

    the first loan - everything looks good closed, etc.

    Account Type = Conventional Real Estate Loan, Including Purchase Money First
    Account Status = Closed
    Payment Status = Credit Grantor reclaimed collateral to settle defaulted mortgage

    the Second loan however still looks ominous. since sending my letter i've heard nothing from them.

    Account Type = Unknown - Credit Extension, Review, Or Collection
    Account Status = Closed
    Payment Status = Charge-off

    anyone have similar info on the second loans?
  17. KFish

    KFish LoanSafe Member

    Crush-I have been following your thread as I am in a similar situation in AZ. YOur loan status looks good...chargeoff means they are not trying to collect, the debt is basically being written off..and the account is closed. Maybe there is a better way to have it? But I would think that is better than it was before when they were trying to collect.
  18. pookey

    pookey LoanSafe Member

    Actually a chargeoff is only an accounting procedure, it doesn't get rid of the debt:

    <table cellpadding="0" cellspacing="0" width="100%"><tbody><tr><td>Charge Off

    </td> <td align="right" valign="top">[​IMG]</td> </tr></tbody></table> A charge off is the term that creditors use when they determine that they are not able to collect a debt that is owed to them and they write that debt off as a loss against their income taxes.

    The act of creating a charge off balances the creditor's books, but it does not let the debtor off the hook. A charged off debt is not a "forgiven" debt. The money is still owed and the creditor will usually turn that debt over to a collection agency or a lawyer to effect collection.

    A charge off usually occurs when a debit has gone without payment for at least a period of six months and the debtor has made no attempt to work with the creditor to negotiate new payment terms. Once the charge off occurs, the debtor's credit bureau is notified and the charge off is recorded as a negative entry.

    Having one or more unresolved charge offs usually results in the debtor being denied credit by other lenders. It can also affect the interest rate that other lenders charge on current debts even if those lenders were not impacted by the charge off themselves.
  19. crush67

    crush67 LoanSafe Member

    i think the definition of charge off is accurate.

    i still have not heard back from PNC since sending my letter 6 weeks ago. i guess PNC are still reviewing the situation. I assume they are trying to find an angle to try and collect the debt from me. i'm not sure what angle they can take since as far as I'm concerned the loan was purchase money and falls under the 580b civil code.

    i guess time will tell...
  20. crush67

    crush67 LoanSafe Member

    in case anyone is still following this post, I promised to keep posting any updates. i have not heard back from PNC since sending my letter on May 13th 2010; some three months have passed.

    I did get a reply from the attorney general a couple of weeks back. they at least recognized i sent a letter; saying thanks for notifying them, and if i want to make an official complaint fill in a form to do so. but they did not say anything specific about my situation e.g. whether the PNC should be attempting to collect or not.

    so i'm still waiting to see what happens with PNC. I've had a couple of generic letters forwarded from former address to my current address about attending a workshop to work out financial issues. the letters do not reference my specific loan or foreclosure so i treat them as generic and ignore them. my credit report sill looks the same, payment status = charge off. so nothing seems to have really changed yet.

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