If you are facing a foreclosure, it is important to understand the laws and the process. Once you know the process, you will be able to better understand the choices available to save your home. For example, a Chapter 13 Bankruptcy could save your Riverside home and wipe out your second mortgage.
If you are facing foreclosure call one of our Riverside Bankruptcy Attorneys at 888.558.2992 today to learn about the options available to you that can save your home that you worked so hard to buy!
Judicial Foreclosure vs. Non-Judicial Foreclosure
The first thing to understand about foreclosures is the difference between the two types of foreclosure.
A judicial foreclosure is initiated by a lawsuit. The benefit to a lender in a judicial foreclosure is that they make seek a deficiency judgment. That means that the lender can seek not only the property back from the borrower but they can (in some cases – see below for the exception) also seek a judgment for the difference between the value of the property and the amount owed by the lender. That is right, you could lose your home and sill owe money! Luckily, judicial foreclosure are extremely rare because a judicial foreclosure is a lawsuit and lawsuits in Riverside County take a very long time right now. Accordingly, most lenders of property in Riverside will seek a non-judicial foreclosure.
The most common type of foreclosure in riverside is a non-judicial foreclosure. The lender initiates the process by serving a notice of default. The notice of default lets the borrower know that they are behind in their payments and that unless the borrower pays the money to catch up on the payments, the lender intends to use its right of sale in the deed of trust to sell the property at sale. If the borrower does not pay the back payments, the lender will sell the property in 3 to 6 months. The key for the lender is that this type of foreclosure takes about 6 to 9 months total and they don’t have to pay an attorney to file a lawsuit or face the possibility of cross claims by borrower.
The One Form of Action Rule
The One Form of Action rule is one of the most misunderstood rules regarding foreclosure. It is really pretty simple though. It more less means that a lender cannot judicially foreclose and bring a lawsuit for the deficiency. They must do one or the other. It gets more complicated when talking about how it applies to a junior mortgage like a sold out second mortgage. For example, a sold out second lender (that is not the same lender as the first) can go after the borrower for a deficiency judgment (unless the second was a purchase money loan).
What is a purchase money loan and why does it matter? A purchase money loan is any loan that was used to purchase the home. It is NOT limited to the first mortgage. If the second was taken out at the time of purchase and used to purchase the home, then it is purchase money.
It matters because no lender can get a deficiency judgment on a purchase money loan – it does not matter if it is the first mortgage, the second mortgage or even the fifth mortgage!
What is not a purchase money loan?
Any loan taken on a home but not used for the purchase of the home. These includes home equity lines and home improvement loans among others. If it is not a purchase money loan, a lender can get a deficiency judgment so long as they do not use a non-judicial foreclosure first.
Why is this important? It determines if you are on the hook to just lost the house or have a judgment against you. For example, if the first non-judicially forecloses and wipes out a non-purchase money second, then the lender on the second can sue you for whatever you still owe on the second!!! It also means that you may still be on the hook for a deficiency after a short sale if your broker did not make sure you got relief prior to the sale.
Is a refinanced loan that was originally a purchase money loan lost purchase money protection?
That is honestly a fairly unsettled law. If you ask most Riverside Foreclosure attorneys, they will tell you yes. This is based on one California case that says that a borrower refinanced and therefore lost purchase money protection. The problem with that case is the facts are not clear. We find more compelling the line of cases that say you track back the money to what it was originally used for and that if a loan is purchase money, it does not cease to be so because new notes are exchanged on substantially similar terms. One case even suggests that as long as the obligation is secured by the same property and remains substantially the same as when it was originally created, the purchase money limitations continue to protect the borrower.
What Does it All Mean?
It means that the California laws regarding a Riverside Foreclosure are extremely complex and depend on the facts of a particular set of circumstances. It means that a Riverside Foreclosure Attorney would be extremely helpful in determining what is best for you.
What can I do?
Well there are several options: Short Sale; Walk Away; or Save Your Home Through the Power of a Riverside Chapter 13 Bankruptcy. You may even be able to get rid of that second mortgage.
If you want to save your home and live debt free, contact us today by using the form on the right or giving us a call at 888.558.2992. You can also fill out our free online Riverside Bankruptcy consultation form. Your consultation is free and confidential.
As Riverside Bankruptcy Lawyers providing affordable Chapter 7 & Chapter 13 Bankruptcy debt relief, we are proud to serve the following areas of Riverside County: Riverside, Palm Springs, Banning, Beaumont, Blythe, Calimesa, Canyon Lake, Cathedral City, Corona, Coachella, Desert Hot Springs, Hemet, Indian Wells, Indio, Lake Elsinore, La Quinta, Menifee, Moreno Valley, Murrieta, Norco, Palm Desert, Perris, Rancho Mirage, San Jacinto, Temecula, Wildomar and all unincorporated areas of Riverside County.