If my home wasforeclosed on, can the bank ipursue me for the balance of my second mortgage?
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If my home wasforeclosed on, can the bank ipursue me for the balance of my second mortgage?
My loan was initially structured this way – 240K on the primary and 60K on the second. Do I have to pay this? Also they are trying to serve me paperwork which I am avoiding. Should I avoid the paperwork or accept them?
Asked on August 3, 2010 under Real Estate Law, Arizona
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
Arizona allows "deficiency judgments." That means that if a property is foreclosed upon and sold at foreclosure sale, if the proceeds of the sale do not pay off the loan(s) in full, the lender(s) can come after the homeowner/debtor for the "deficiency"--the unpaid amount. And both first and second mortgage holders can pursue the borrower for amounts owed. Therefore, if, say, the 1st mortgage is paid off in the entirety but the second mortgage is not paid, the lender for the second mortgage can come after you for the money. (The only difference between a first and second mortgage is in terms of which gets paid first, if there's not enough money for both; from the borrower's perspective, they are equally enforceable.)
Avoiding the paperwork will only buy you a few days; there are mechanisms for serving on people who avoid the papers and deeming them legally served.
You may wish to consult with a bankruptcy attorney to see if that's good option for you. In particular, a Ch. 13 bankruptcy can often be a good bet when sufficiently underwater on a second mortgage.
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