Legal Question in Real Estate Law in California

Re: real estate law

There are deficiency lawsuits and judgments in California. I have defended several clients against them. The rule for non-deficiency is primary residence, no refi's, and no secured loans against property after the date of purchase. If your son's condo meets these requirements, he can just walk away, worry-free. However, if it does not meet these criterion, then he needs to have a lawyer advise him on how to protect himself against a potential lawsuit. On the issue of HOA dues, these may not get paid out of the foreclosure sale, so it is possible your son could be sued for these fees as well. The taxes are the first things to get paid, so you son need not worry about them. For more info, you may go to my web page: www.lemonattorney.net where I answer frequently asked quesitons about foreclosure law.

Re: real estate law

We do have deficiancy judgments, but they are available only in limited circumstances. You already have two answers trying to delineate when a lender can go for a deficiency judgment and when it can't. The answers cover the situation rather well, I think. Since the answers are a little different from one another, they can't both be completely right. So, let me add a third explanation:

(1) If the lender forecloses by exercising the power of sale in a deed of trust, i.e., if there is a trustee's sale, there cannot be a deficiency judgment.

(2) If the lender forecloses judicially, i.e., by going to court and suing for foreclosure, there stall cannot be a deficiency judgment if the loan being foreclosed is a first deed of trust.

(3) Furthermore, there cannot be a deficiency judgment on a judicially-foreclosed second deed of trust IF that deed of trust is either (a) a loan carried by the seller, or (b) a purchase-money loan made by someone other than the seller to the buyer of an owner-occupied one-to-four unit residential building.

So, what is left that is subject to a deficiency judgment is judicially-foreclosed refinancing loans and purchase-money seconds by third-party lenders on other than owner-occupied 1-to-4 unit buildings.

I THINK this is accurate.

However, the borrower's concerns don't end with deficiency judgments. A defaulting borrower still has to worry about suits from sold-out juniors - second-mortgage lenders who lose their security when a senior loan is foreclosed and the proceeds don't pay off the second - and suits by the lender for injury other than the deficiency itself- for example, a lender could sue for financial injury resulting from the borrower's loan-application fraud, or the borrower's waste of the collateral (not doing repairs, not keeping the insurance paid) when these things result in substantial impairment to the value of the collateral.

Re: real estate law

If the foreclosure is by Trustee's sale, there is no deficiency judgment. That being said, the "bank" may not have the right to foreclose and the foreclosure can be challenged. Have your son call me Monday and we can see if we can help.

Re: real estate law

Assuming only one loan on the property, and further assuming that loan has not been refinanced and was the original loan used to purchase the property, there can be no deficiency judgment. Whether the property is owned-occupied or a rental makes no difference in the analysis. If, however, the original loan has been refinanced, or there is a second trust deed on the property, the result would be different. If a second trust deed exists and the first forecloses, the second becomes a "sold-out junior lien holder." The sold-out junior lien holder CAN sue on the note and obtain a judgment.