Legal Question in Real Estate Law in California

Re: mortgage loan

I agree with Mr. Whipple's analysis. It appears that you continued to use a credit line, which may still be secured by a deed of trust on your property. If they have not reconveyed the power of sale back to

you, then in reality, this second deed of trust is now a first deed of trust, and your refinance is really second.

Deeds of trust contain dragnet clauses, which means they secure not only the original credit line, but additional charges that you have made.

To tell if this scenario is true, you will need a title search performed, to determine the priority and reconveyance on any of the trust deeds.

Your refinancing lender is not going to be happy to find out that he may be second.

Very truly yours,

Re: mortgage loan

Escrow companies follow instructions; they don't push a broom behind clients to clean up their unfinished business. Their instruction with respect to your 2nd/line of credit probably was to "pay it off" not to close the account. So, they paid it off. It was probably up to you, or to the line of credit lender, to close the line.

Your continued use of the line of credit raises serious legal and ethical questions. First, if you were to review the terms of that line of credit, you would undoubtedly find some provision requiring you to keep the collateral in place. Next, I think you may be assuming too much when you state "we know they no longer have a lien on our house...." If you signed a deed of trust, you gave them a lien that is not extinguished until they reconvey that security interest back to you. Unless there is a recorded deed of reconveyance - and you should check this immediately - your property is just as encumbered as ever (with minor exceptions that don't seem applicable here).

Are you still receiving statements, and are you current on the payments?

Further, even if the $26,000 of loans is unsecured, which I doubt, if you default (or have defaulted) the lender can sue you, probably get a judgment, then file an abstract of judgment and pursue a foreclosure almost as though nothing had happened.

This is the 21st Century and lenders have enormous technological resources to track their loans and pursue debtors. If the lender is not aware today, it will be tomorrow. Whatever "lien report" you may be relying upon may not be accurate or complete. You could follow up by locating, down at the recorder's office, first of all the deed of trust under which the line of credit was initially set up; then, look for a full reconveyance from the lender or its assignee. If there is none, the lien of the deed of trust still affects your property (with rare exceptions, as mentioned above).