Legal Question in Real Estate Law in California

Re: Can short sell lender put a lien on another property

In answer to your first question, the lender will probably not accept your short-sale unless you sign the note and security agreement, so the question is somewhat irrelevant. Remember, you signed a promissory note agreeing to repay a specific amount to the lender irrespective of the value of the property. Second, you cashed-out of the property, so why should the lender be forced to eat the short. Regardless of whether you sign their promissory note or not, you already have signed a promissory note agreeing to repay the full loan amount, so if they get less than that in the property sale, you still owe the difference.

You may be better off in a foreclosure, however, your loan could be subject to a deficiency as it is not purchase money, it was a cash out (which I must assume was not put back into this specific property), and it is not an owner-occupied home. To obtain a deficiency judgment, the lender would have to pursue judicial foreclosure, which in most cases they do not, but you have no control over that. They may, in spite of the statistics which say they do not often do so, elect to judicially foreclose and get a deficiency judgment, and there is little you can do to stop them. While the odds might be in your favor in a foreclosure, there are no guarantees. Best bet is to work with them on negotiating the short sale, but be congnizant of the fact that you are not the most compelling candidate with six properties - even if they are underwater.

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