One of my clients just inquired about the following. I consulted this with my local real estate attorney.
Situation:
The client had two mortgages on the house. This were original purchase money loans. NO refi or Heloc. The client got foreclosed. The second mortgage holder is now after the homeowner. They are threatening law suit. Can that happen?
Reply:
Oscar:
I do not believe there is any protection for "purchase money" mortgages in WA.
Here is the relevant portions of the statute. There is no deficiency judgment if the elected remedy is a non-judicial trustee sale foreclosure and the sale is active or goes through. However, any lender can elect to seek recovery on the note instead of foreclosing, which is what a second-position lender out-of-equity is likely to do.
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RCW 61.24.100 |
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•(1) Except to the extent permitted in this section for deeds of trust securing commercial loans, a deficiency judgment shall not be obtained on the obligations secured by a deed of trust against any borrower, grantor, or guarantor after a trustee's sale under that deed of trust.
(2)(a) Nothing in this chapter precludes an action against any person liable on the obligations secured by a deed of trust or any guarantor prior to a notice of trustee's sale being given pursuant to this chapter or after the discontinuance of the trustee's sale.
It seems like the 1st foreclosed so now the 2nd is coming after them personally on the note, which appears to be allowable.
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