California Court of Appeals (4th District) overturned CCP 580d as it pertains to protecting homeowners that choose foreclosure over Short Sale.
California law “protected” homeowners that chose foreclosure as an alternative if the lenders that were foreclosed on 1st and 2nd “purchase money” liens (80/20 Purchase Money Loan) whether or not if the loans we’re still held by originating lender or servicer.
Court of Appeals overturned a portion of 580d…if the servicer of the 2nd lien changed hands to a new servicer or entity, then the new servicer may pursue the homeowner and seek legal resolution of this debt…likely a judgement that never goes away! Yikes!
Here are some specifics as spelled out by a well known Attorney:
The California 4th District court of appeals covers San Diego, Imperial, Orange, San Bernardino, Riverside and Inyo.
What does this mean to the homeowner?
It means all those “80-20” loans made to avoid Mortgage Insurance payments, now allow the holder of the second mortgage to sue the homeowner IF the holder of the second mortgage is not the same as the first at the time of the foreclosure sale.
The only “possible out”:
IF the second mortgage is held by the same lien holder at the time the foreclosure is started AND the first deed of trust sells the second deed of trust to avoid the anti-deficiency law
But the homeowner foreclosed upon needs a lawyer to figure that one out.
The California Supreme Court denied review so it holds as good law. At least in the 4th District.