Foreclosed 2 yrs ago, now 2nd mortgage sends Coll. bill (loan, real estate, non-recourse)

[barbh12]

I had my 1st mortgage foreclose on my house in early 2007. It was purchased by the Bank for $92000 on 3/20/2008, which is what was owed on it for the 1st mortgage.

I received a 1098 Mortgage interest statement for 2007 from the 2nd mortgage, but don't know why, because I never paid them anything in 2007.
I'm working on that right now to see why.

Then on 9/23/2008 it was sold again to a private person for $103000.

Now today, I receive in the mail a letter stating that the 2nd mortgage is now about $30,000, (it was only $10,000 when the forecloser took place) and if I don't pay it, they will garnish my wages.

Can they do this? I thought everything was taken care of in the forecloser. I have been looking for a 1099C, because there would have been a cancellation of debt, but not a collection notice.

What course of action should I take now? I can't afford to pay this debt that is why it went to foreclosure. Please help me.

Barb

[suzie02]

First thing you need to find out is if the second mortgage is a recourse loan.
What state are you in?
Did you take this mortgage out as part of the purchase or was it cash out to pay other debt?

[chet everett]

GET ALL YOU PAPER WORK TOGETHER!

If the debt was not discharged, but assigned or held against you then "Houston you have a problem". The situation I have seen is that many borrowers FAIL to show up in court and that is where the file last gets a thorough review -- if the lender has all kinds of nonsense in the file and then they send that file to some half-baked collection agency who knows WHAT will happen...

If you have copies of EVERYTHING you might be able to simple go to court and represent yourself ("pro se" pleadings) and you might be surprised that judges will be moderately tolerant.

If your paper work do not support your claim it makes sense to get an attorney who can get copies of everything and hash things out, but you will need to budget at least several hundred dollars for this...

[barbh12]

In the state of KY, and this loan was taken out at the time of purchase. The 1st mortgage was 80% of the purchase and 2nd mortgage was the 20%. This was done a lot in this area at that time in 2005.

[suzie02]

Originally Posted by barbh12

In the state of KY, and this loan was taken out at the time of purchase. The 1st mortgage was 80% of the purchase and 2nd mortgage was the 20%. This was done a lot in this area at that time in 2005.

The first thing you need to do is research if KY is a recourse state. Maybe google it. I am in CA and if you were here you wouldn't owe the second mortgage because CA is a non-recourse state. FL on the other hand is a recourse state and you would owe it there.

[NJ987654]

In the case of a foreclosure, it is possible in some states for the lender to attempt to collect any amount of the debt not paid by the proceeds of the sale or auction of the home. That is why many people do short sales (where the bank agrees to accept less than owed without pursuring the difference). As the previous poster said, it will depend on state law.

If you do owe it, you will possibly need bankrupcy if you can not pay it. I would consult a real estate attorney.

[barbh12]

From what I can find, it looks like KY is a recourse state. Now what?

[suzie02]

Originally Posted by barbh12

From what I can find, it looks like KY is a recourse state. Now what?

Then they have the legal right to go after you for the money.
Next question, who sent you the letter in the mail? If it is a collection agency then the amount is very negotiable. I would ask for an explanation of the charges because I can't see how $10,000 would turn into $30,000. The next question is do you have any assets? Would you be able to pay any amount of money? If you can't pay anything at all then it is time to find a bankruptcy lawyer.

[windtimber]

I'm not from Kentucky, but here's my take based on my jurisdiction's rules...which aren't particularly different from anyplace else. Recourse, non-recourse, probably doesn't matter. If the 1st mortgagee foreclosed and bought in at the sale for the total mortgage debt, mortgage #1 is done and satisfied. Mortgage #2 never got paid and didn't get a nickel from 1st mortgagee's foreclosure. Since 2nd mortgagee did not pay off the 1st mortgagee [it didn't redeem as a junior lienholder], assume priority, and foreclose its now senior encumbrance [or so it appears from the OP and would usually be the case with a junior lienholder holding only $10k on a $100K property] it can go right ahead and sue the mortgagor under the mortgage note.

[Kjirsten]

I don't mean to hijack this thread, but I have a similar problem. My house was foreclosed on in 2007, but was then sold by the 1st mortgagee for less than the total loan. 1st mortgagee wrote off the balance. The 2nd mortgagee is now coming after me for that loan since they didn't get paid anything.

The 2nd mortgage was taken out for improvements long after the original loan.

I live in Colorado, which is a non-recourse state. I cannot afford to pay the 2nd mortgage but I do have a nice 2001 truck (only vehicle I own and in fact, only thing of monetary value).

I guess I have two questions: Do I have to pay this 2nd mortgage and if so, if I file bankruptcy, will they take my truck?

I can't seem to find where recourse vs. non-recourse applies to 2nd mortgages.

Thanks