Legal Question in Real Estate Law in California

I would have to review all the escrow closing and loan docs to be sure, but it sounds like they do not have the right to collect this debt. If you would like assistance stopping the collection activity and possibly pursuing an action for violation of the Fair Debt Collection Practices Act, let me know.

I have a different opinion from Mr. McCormick. It sounds to me as though your loans are governed by Code of Civil Procedure section 580b which makes most purchase-money loans exempt from deficiency judgments. It further sounds as though your two purchase-money loans were made by different lenders. If one parses CCP 580b carefully, it is clear that one category of purchase-money loan is NOT exempt from lender suit for deficiency judgment: A loan from a third-party lender (i.e., not seller financing) for property that was not a one-to-four unit residential structure that was occupied, in whole or in part, by the purchaser.

In other words, a purchase-money second loan is not exempt from an action for a deficiency after the first is foreclosed when the property is either (a) five units or bigger, or (b) one-to-four units and not owner-occupied.

If this was an income property rather than your primary residence, you are probably still liable to the lender, and since it has lost its collateral through no fault of its own, it can sue you on the promissory note as an unsecured obligation.

If on the other hand this was an owner-occupied property, you are probably protected by CCP 580b.

I say "probably" in the foregoing analysis because, among other things, the analysis could be different if the first and the second were made by the same lender, or two related lenders acting in cahoots. In such a case, the lender might be barred from seeking any relief from you by the prior trustee sale by its affiliate.

I agree with Mr. Whipple to the extent that your second may or may not be a true purchase money mortgage. An attorney is going to need some more information. Another question that I have is whether the same lender held both the first and second, which may also provide another avenue of protection.