Legal Question in Real Estate Law in California

Re: Default on a Second Mortgage

You are entitled to foreclose, but this may be costly and really depends on the property's value to see if you'd come out ahead by doing so. You can also try negotiating something with the debtor, or perhaps see if he/she can refinance both loans and pay you off, or perhaps sell the property.

You're in a difficult position if the first lien holder forecloses, as that could wipe out your lien, so negotiating a resolution with the debtor now will be in your and his/her best interest.

Re: Default on a Second Mortgage

Your note is secured by a "purchase money" second deed of trust which can be extinguished or "wiped out" if the first mortgage forecloses. Your only remedy is to foreclose yourself, but you must do this before the first carries out a foreclosure. Our office can advise you and/or provide you with a list of foreclosure agents, etc.;the bottom line is do not delay or you run the risk of having your security lost.

Re: Default on a Second Mortgage

Most of the prior advice is sound, but some of it may be unintelligible to a layman.

In order to make a sound decision as to whether to foreclose, try something else, or do nothing, an attorney advising you would want to know (1) the size and terms of the first; (2) the size and terms of your loan; (3) the current market value of the property, i.e. how much equity is there; and (4) the personal financial circumstances of the borrower and you.

Successfully foreclosing on a second may require you to buy the property at the foreclosure auction and carry it until you can resell it in the marketplace. This can give you a profitable outcome but involves some risk and requires that you have some liquidity to handle the first and costs (insurance, taxes) until you can resell.

Real estate attorneys or foreclosure services can handle the entie process for you.

Explaining all the ins and outs would take pages. There are 'self-help law' books on the subject of foreclosure, many written from the borrower's perspective, but useful to lenders as well.

A foreclosure by the holder of the first would 'wipe you out' only in the sense that your loan would be unsecured. If a foreclosure sale produced more than enough cash to pay priority claims such as the first, costs of sale, and the taxes (if any) due, the holder of the second is entitled to be paid from those excess proceeds.

The anti-deficiency laws require a lender to look only to the collateral (the house) and not to pursue the borrower for repayment. They do seem to apply to your situation since a purchase-money loan seems to be involved. However, your lawyer should examine the facts to see if there is an exception available under which the borrower might be pursued if insufficient value in the collateral leaves you under-secured in any way.

Re: Default on a Second Mortgage

You have to foreclose on your second while maintaining the payments on the first. If the first goes to foreclosure it wipes out your interest.

Re: Default on a Second Mortgage

Your legal rights, unfortunately, are not too many. The previous post is correct in that you need to make payments on the first in order to protect your interest. However, it is likely that the payments on the first are not getting paid.

I would suggest that you contact the 1st lender and find out if the debtor is current on the 1st.

You can always take another approach of attempting to resolve the matter without foreclosure, but that would require a "workout order" between the 2nd and the debtor.

I hope that this information has been helpful, please do not hesitate to call if I can be of any further assistance.

Khach "Catch" Akhkashian

Re: Default on a Second Mortgage

Your deed is subjec to anti deficiency. As such, your only remedy is to foreclose. The debtor may pay you off before the trustee sale. You don't have to complete the sale is you do not want to.

We can help you.