Understanding Your Liability to Junior Mortgage Lienholders
Many people across the United States and in California have two or more mortgages on their house. That could create an issue for homeowners who are unable to continue making mortgage payments due to job loss, other financial setbacks, increase in interest rate or in loan payment. With real estate values so depressed, there may not be enough money from a foreclosure or short sale to pay off your first mortgage, not to mention junior lienholders from other loans you have taken out on your property.
At the law firm of Weintraub & Selth, APC, we offer solutions to homeowners who are burdened by mortgage debt. As attorneys with extensive experience in bankruptcy, foreclosure and other consumer debt problems, our goal is to protect you from any possible deficiency judgments from lenders, including the lenders who hold your first deed trust and your junior lienholders.
Our lawyers can serve distressed homeowners across the United States and in Los Angeles, Santa Monica, the San Fernando Valley, South Bay and surrounding communities in southern California.
What Protection Do I have in the Event of Foreclosure?
Depending on how your lender forecloses on your property, California's anti-deficiency law may protect you from deficiency judgments.
In California, there are two ways a lender can foreclose on property:
- A judicial foreclosure, in which primary and junior lienholders can go after the homeowner for any deficiencies after the foreclosure
- A trustee sale, in which lienholders who are foreclosing (including junior lienholders) cannot seek a deficiency judgment against the homeowner
The majority of foreclosures in California are trustee sales and you are protected under California's anti-deficiency laws from the foreclosing lender. But you may actually have exposure to the unsatisfied claims of junior lienholders.
What Protection Do I Have in a Short Sale, Sale-Leaseback or Deed in Lieu of Foreclosure?
Short sales and other foreclosure alternatives do not in and of themselves afford protection under California's anti-deficiency law. As your lawyers, we would push hard to negotiate a release from the lender that holds your first mortgage, as well as from any junior lienholders. However, depending on the money being paid from the sale to the junior lienholders, they may or may not sign the release.
If all lienholders do not sign a release, filing bankruptcy may be necessary to eliminate your personal liability for the deficiency on your mortgage. Filing bankruptcy may also eliminate any tax consequences you may have for the cancellation of indebtedness.
For more information: To discuss anti-deficiency law and your mortgage debt with one of our Los Angeles attorneys, call (310) 584-7702 ((866) 572-2423 toll free) or complete the contact form on this Web site. Se habla español.
