I received a text yesterday from one of my previous clients who I helped through a short sale in Lake Elsinore, CA. Here’s what the text said, “Any ideas why I am getting collection calls to collect a debt of $68,000 against the house? I thought this was taken care of through the short sale? The debt collector said he was going to continue to call and report me to the credit agencies until I set up a payment plan.” I could not believe what I was reading. I instantly called my client and asked for the contact info for this company.
I called the collection company and asked for clarification. I have to say, the tone and direction of the conversation was going in the toilet quickly. The representative was taking a hard stance and insisted my client owed the money and needed to set up a re-payment plan. I asked the rep if he was aware of CA state law regarding deficiency judgments…specifically CA Civil Code 580B (CA Civil Code 580B in layman’s terms states a home owner cannot be held liable for a deficiency judgment when their home was either foreclosed upon or short sold when the loan on the subject property was the same loan they used to purchase their home, also known as purchase money). Since my client’s home was a short sale in Lake Elsinore, CA and was never refinanced, they fall under the protection of CA Civil Code 580B. The rep insisted he needed a letter from my client’s attorney….excuse me….an attorney? I’m not a rocket scientist but it’s pretty clear when you can and can’t seek a deficiency judgment. Needless to say the call ended.
I quickly started to draft a letter to send to this collection company along with making a phone call to my real estate attorney to assist with this matter. About 15 minutes later I received a call from the rep at the collection company stating that I was right and he was going to cease any further collection activities. Score one for Ryan Smith!
What concerns me most about this situation is knowing there are previous home owners who were foreclosed upon or had to short sale that do not know the law, even agents that do not know the law and I know these collection companies will end up collecting money from people that should be free and clear. This really gets me upset. I only wish more agents would educate their clients about this new trend.
This is Ryan Smith from Temecula, CA signing off until next time………..