Legal Question in Real Estate Law in California

Re: Foreclosure or Short Sale: 2 different Lenders

It sounds as though you really should not have been able to purchase the house to start with, or you would not so easily and so quickly have fallen behind in payments, and there are a lot of borrowers in your position. If the first loan forecloses and the second loan does not, the second loan's security (the second deed of trust) will be extinguished, or wiped out. If that happens, then what the lender who made the second loan can do, depends upon the nature of that loan; if it was TRULY made at the time of the purchase (i.e., the lenders--not the loan broker--of both the first and second loans KNEW about the fact that you were not making a down payment and were purchasing with NO money down, and both loans were part of the purchase escrow), then the lender of the second loan has no recourse. BUT, if the second loan was made or recorded after you ALREADY had title, (or if there were any false statements involved with the making of the loan, such as your documents show you lied about how much money you earn, etc.)then that lender of the second loan can sue you for the amount of the loan and all costs associated with it and can enforce a judgment against any and all assets and can garnishee your wages. Property taxes go with the house, and if it is foreclosed upon, then the foreclosing lender will bring them current and add to the amount of the loan that was foreclosed upon, but they will not be a personal obligation of yours. With respect to "liens" on the house, it depends upon what kind of liens. Federal and State Tax liens are still your responsiblity, and so are judgment liens; property tax liens are as mentioned above. PLEASE NOTE, AS THIS IS IMPORTANT: you claim the "original" lender "sold" your loans to two different lenders. Was your original lender really a "lender", or was it a "loan broker"? Most of the problem loans come from those made by brokers, who are not really funding the loans, but acting as representatives and/or correspondents for the REAL lenders. These loan brokers may inflate income figures, fabricate sources of income, etc. in order to put a loan package together for the actual funding lender, who is unaware of the true facts and would never have made the loan if they knew any of the facts stated in the loan documents were false. These brokers only care about getting their "points" and fees and once they do, they then transfer, the loans to the actual sources of the money. If your loans were of this type, take a good hard look at your loan documents.