Legal Question in Real Estate Law in California
I purchased a home on 12/2006, which I did 100% financing with Bof A. I was living there up until 9/2010. At that time I decided that I can no longer afford the property, so I stopped making payments and pursued a short sale. I have not been able to close a short sale because buyers keep backing out. The last buyer backed out because, in the course of doing the inspections, the inspector told the buyer that the house is a manufactured home. The realtors pulled the permits from 1995, when the house was built, and sure enough it is a manufactured home. This info was not disclosed to me when I purchased the property. The house is over 2000 sq ft, has 2 levels, is on a cement foundation, and one would have no idea that it is a manufactured home looking at the house from the outside/inside. I know that it is too late to file a lawsuit against the people that sold me the house. My concern is if I end up foreclosing on the property, can BofA sue me for not disclosing that it is a manufactured home when I got the loan from them? This would have been hard since I did not have a clue and it was not disclosed to me. Or are the banks held responsible for knowing what type of properties they are making a loan for? I understand that manufactured homes usually require specific types of loans/lenders. Thanks in advance.
2 Answers from Attorneys
The law makes a sharp distinction between manufactured homes that are permanently affixed to foundations on land you own, and those that aren't. The former become real estate and are subject to much the same rules as stick-built houses, including assessment as real property. Do you get a property tax bill including the house and the land? If so, the lender is probably subject to the same foreclosure laws as for a stick-built home. As to whether the lender could sue you, lawyers will always say "Sure, anyone can sue you for anything!" but the question really should be "Will they?" and if they do, "Can they win?" In my opinion, the chances of being sued are very remote, and the chances of the lender prevailing are also remote. Lenders use appraisers to give them an idea of the value of the collateral. If this manufactured home had become real estate, the lender would be expected to rely on its appraisal, not any information provided or withheld by the borrower. Pull out your copy of your loan application and verify that its contains no question such as "Will this loan be secured by a stick-built home or a manufactured home?" I'm pretty sure no such question is asked. If not, the lender is stuck with the results of its own investigation, i.e., the appraisal. (Note Health & Safety Code section 18039.1 re conversion to real property and law applicable to default and sale).
Theoretically, the lender is prohibited from suing you after foreclosing by the antideficiency provisions of Code of Civil Procedure section 580b and 580d. Those provisions, however, do not prevent the lender from filing a lawsuit for fraud.
I do agree with Mr. Whipple that a fraud lawsuit against you seems remote, but some lenders do file them. I know this because I have defended one, and there are several published cases involving these types of lawsuits. Knowing whether or not you have potential for a lawsuit, and whether you have good defenses, is going to depend on the paperword submitted to the lender, either by you or your mortgage broker. It may be a good idea to gather that paperwork now, and speak to an attorney.
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