Can the bank come sue me for a second mortgage after a non-judicial foreclosure?
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Can the bank come sue me for a second mortgage after a non-judicial foreclosure?
I can only find answers pertaining to a single loan. In WA state.
Asked on July 13, 2011 under Real Estate Law, Washington
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
That is a very good question and the answer depends upon the law of the State that you reside in which is Washington.
The answer to your question would center upon whether or not the second mortgage is a "purchase money" for the acquisition for the property that was foreclosed upon and whether the proeprty foreclosed upon was a residence or not. A "purchase money" loan is a loan used by a person to acquire property as opposed to a refinance and typically a home to live in for personal use by the borrower.
Several years ago lending institutions had dual loans for residence purchase, a first and a second where the first loan secured by a mortgage typically was much larger than the second loan, usually an 80% to 20% ratio.
If the second trust deed was a "purchase money" loan used in the purchase of a residence and the second trust deed foreclosed upon the property by way of a non-judicial foreclosure as opposed to a lawsuit filed in Washington State court, then most likely the bank cannot come back and sue you for the balnce owed on any shortfall after the residence's resale.
Also, some States have statutes stating that in a non-judicial foreclosure by a mortgage holder as to any property precludes the bank holding the mortgage, first, second, third or otherwise from suing the property owner for any balance owed after the property's resale.
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