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Two CA mortgage loans both with the same lender. Can the lender sue for the second loan if we shortsale or go through foreclosur

Sacramento, CA |

We have the same question. We are short-selling (but it may go to foreclosure) one house with two mortgages, both from the same bank. The second loan was used to purchase a second house, which we are keeping.Would the second loan, since it was used to buy residential property, be considered a purchase money loan and therefore be exempt from a deficiency judgment? Can an CA attorney answer?

Attorney Answers 1


This all depends on the timing of the loans. If you purchased the house with one loan or with two loans but later refinanced the second, then the second is NOT a purchase money mortgage. The term purchase money mortgage refers specifically to the purchase of the home for which the mortgage lien is placed -- it is not transferrable. It appears, however, that the second loan was taken well after the first and not used to purchase the actual home on which its lien sits.

Under the facts as you state them, you would not be able to escape a deficiency judgment in California. The fact that you own a second property would mean that the holder of the second loan could and likely would place a lien for the deficiency judgment on that second home.

Stephanie White
Simi Valley, CA

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