people discussing home related issue

Homeowners Increasingly on the Hook for Second Lien Liability

A Texas company is aggressively pursuing hundreds of Californians to collect second-mortgage debt on homes they've already lost to foreclosure. Most homeowners believe their mortgage debt will be wiped out after the bank takes the property through foreclosure. But this company, Heritage Pacific Financial, has aggressively pursued collections and filed lawsuits to collect on the still viable debt.

These vulture funds prey upon unsuspecting people who have already suffered the trauma of losing their home. They often wait years to spring up, taking advantage of the 4-year statute of limitations that California provides. Therefore, these funds can wait a long time for the prior homeowner to recover financially before they commence litigation. They pay very little when they purchase the old debt, and they do not need to act quickly.

Once these claims for debt collection pop up, it costs time and money trying to defend against them. Often, there is little chance of success. The law is clear that certain debts remain viable post-foreclosure. Just when an individual is recovering financially from foreclosure, they are hit with threats to destroy their credit and seize their bank accounts.

The newest breed of vulture will go after debts that should have been wiped out, but the collectors claim fraud in the applications for the original loan. If income was misstated, they might be able to collect on debt that was otherwise uncollectable through foreclosure or even bankruptcy.

The company's lawsuits often accuse defendants of misstating their incomes on loan applications. While many borrowers did overstate their incomes on applications, consumer attorneys say Heritage Pacific is targeting people who filled out their forms honestly or whose mortgage brokers pumped up their applications without their knowledge.

Critics of these collection practices say the company's central tactic is forcing settlements from people who can't afford a drawn-out legal fight and who don't know the details of California law. The company has sued people with second-mortgage debts of less than $150,000, despite a state law prohibiting lawsuits alleging fraud on mortgages below that amount.

It is extremely important for homeowners to deal with this issue BEFORE the foreclosure is processed. Anti-deficiency laws must be carefully evaluated by an experienced real estate attorney. Contact Lawyers Realty Group today for a comprehensive analysis of all of your options and an examination of the hidden liability traps that are almost always missed by real estate agents and loan mod consultants.