Legal Question in Real Estate Law in California

Re: Foreclosure: 1st and 2nd Mortgage

By your question, I assume you mean, if the lender forecloses on the first loan, will you still be responsible for the second loan. The short answer is: yes. A foreclosure of the first loan wipes out the lien of the second mortgage, but not the debt of the second loan. If you stopped paying the debt, the second lender would have the right to sue you for the outstanding balance and most likely obtain a judgment, which could be used to garnish your wages or attach your assets.

Re: Foreclosure: 1st and 2nd Mortgage

Yes, as you lost the "purchase money" protection which your original 2nd carried. If the first forecloses and extinguishes the 2nd, the 2nd can sue you as as a "sold out" junior lienholder. Note, however, if the 1st starts foreclosure but the 2nd steps in and forecloses prior to the 1st, then they have exercised their one action on their note and cannot pursue you thereafter. From a practical standpoint however, if there is little equity it is unlikely the 2nd would want to foreclose and will just allow the 1st to wipe them out and then the 2nd will sue you directly on the note.

Re: Foreclosure: 1st and 2nd Mortgage

Assuming the first mortgage forecloses, then yes, the second mortgage becomes a "sold-out" second, and since it was not purchase money (the original $65K takes on the character of non-purchase money when refinanced), you are liable for the entire balance. You also have a potential income tax issue in that the foreclosure will be treated for tax purposes as a sale of the home at the value of all liens against the home at the time of the foreclosure. If that results in a gain, you may have to pay income taxes on the gain. Check with a tax attorney or CPA on the later point to determine what your exposure is.

What you are referring to is the statute of limitations on a claim for construction defect.

*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. The information provided is general and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence.

Re: Foreclosure: 1st and 2nd Mortgage

Yes, unless they foreclose by trustee's sale.