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  1. #1

    Default Purchase Money First / Cash-Out Second (Same Lender)

    My question involves a foreclosure in the State of: California

    General Scenario:

    Purchased what is my primary residence from family member. Took a mortgage for 75% LTV from Bank "A" based upon appraised value. The "down payment" was a gift of equity from my family member and the home owner, for the other 25% of the homes value.

    6 months later took a HELOC also from Bank "A", to 90% CLTV. Paid off all revolving debt, a car and put the rest of the cash in the bank. Still have the cash in the bank.

    Home dropped 60% in value over the next 3 year and 2 weeks ago the home went through a non-judicial foreclosure.

    A "law/collection firm" saying they represent Bank "A" is contacting me for "appropriate action in the matter of your failure to pay the amount of $XXXX due, etc"

    They don't mention deficiency judgment. They do say that I have 30 days to dispute the validity of the debt or they will assume it's valid. They also say that no one has reviewed the file to this point. It appears to be a generic form letter.

    Based upon Simon v. Superior Court (1992) 4 Cal. App. 4th 63, it seems that the debt is not valid and that because it was the same bank that provided the purchase money 1st and the cash out heloc, that they do not have the right to a deficiency judgment.

    Questions:

    Am I wrong in assuming the above?

    How should I respond to the law firm/collection agency?

    Should I reference the above case?

    Should I contact the lender via telephone?

    If I do have decent personal assets, will they be at risk at any level?

    Is this simply a collection agency or will they litigate?

    All input/replies are greatly appreciated. Hopefully Mr. Knowitall will reply!

    Thanks!

  2. #2
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    Default Re: Purchase Money First / Cash-Out Second (Same Lender)

    If the lender was the same for both mortgages at the time of foreclosure, I expect that you have a pretty good defense to a deficiency under the one action rule.

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