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Second Mortgage deficiency protection

Discussion in 'Foreclosure Laws' started by underwaterinseattle, Jul 20, 2010.

  1. underwaterinseattle

    underwaterinseattle LoanSafe Member

    We need to walk away from our 80/20 in Seattle. Should we stop payments on both at the same time? That is our plan but not sure if the wisest. There is some controversy on these boards and even between apparent legal advice. Some say even in non-recourse states the second can sue and send you to collections for the deficiency. Others like the Real Estate Attorney who consulted with us said they will not because
    1.We are in a non-recourse state
    2. THe property is a primary residence
    3. All the equity is solely for home purchase

    One gal on here said her attorney said Washington is a one-action state and once the 1st forecloses that uses up the "one-action" and the secondary is now freed to pursue more or different action. Our attorney said the 2nd can only seek to collect funds 'until' the 1st foreclosure is finalized, then nothing can happen.

    Now if it turns out the second can sue for deficiency and the debt is now unsecured and at collections. Since I dont have a home as the 1st mortgage has been auctioned,etc.-can they put a lein against my assets, and if so for how long?

    Do I have any options if they can put a lein on my assets? Can I file b7 and be free from it? Is there a statute of limitations on them collecting?
  2. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    From my understanding if you are in a non-recourse state and your second mortgage is a purchase money loan (ie obtained to purchase the home and not a refinance) then your second mortgage holder cannot sue you or put any liens on your assets..
  3. underwaterinseattle

    underwaterinseattle LoanSafe Member

    That is what I was told. Are you aware of the statute declaring that?
    Here is what another said yesterday

    "I too live in Washington. Attorney explained to us it is full recourse for the second loan (if in the event the first mortgage forecloses).

    It is a one-action state, but as the first forecloses (this being their one action) the second does not have to join, thus making their one-action the right to sue you for the difference.

    Many times in this state, the second was known to buy out the first, then foreclose from the first position and leave the second position (yes, themselves again) to sue you for the difference.

    So appears that two different lawyers have stated two different out comes. The one though that your attorney stated is more like a California law and the problem I would have with it is that it noted refi which no where that our attorney showed us in Washington law mentions whether it was used as purchase money or refi.

    You may want to look at another opinion to make sure you are being informed correctly (I would not take our lawyers opinion either, though we did eventually use him for a lien strip and it appeared he knew what he was talking about on issues)."
  4. NewShoes

    NewShoes LoanSafe Member

    Where I am confused is if the first and second are with the same lender. Wouldn't that mean the second joined?

    Everything I read makes me think this is not the case and the unsecured debt is recourse on the second.

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