If my first mortgage gets foreclosed, can I be sued by my second mortgage company?
Let’s say that our first mortgage company has foreclosed on us, and we’ve moved out of the house.
The first mortgage company will collect their money from the foreclosure sale, but they don’t pay the second mortgage company except in very unusual circumstances.
We move somewhere new and started a new phase of life.
Years later, a company sends us a letter, claiming that we owe them money from our second mortgage, because they now own that debt.
Normally, the reaction to this is, “You can’t do that, because I don’t owe the second mortgage company since I was foreclosed on by my first mortgage company.”
Unfortunately, that isn’t the case.
When the first mortgage company foreclosed on us, that turned our second mortgage into an unsecured loan.
Because the mortgage ties “the debt to the dirt,” as the saying goes.
Once we take the house out of the equation, then we are left with unsecured debt.
The reality is that the debt is still there, and we can be sued for it.
So the general rule is we may owe on this debt. But we may have valid defenses — Statute of Limitation, this new company really doesn’t own the debt, etc. And keep in mind that often the company contacting you will be a debt collector under the FDCPA (Fair Debt Collection Practices Act) which prevents them from lying or treating you unfairly.
Take this seriously.
It’s not fun to get these calls. Or letters. But if you do getm, treat this very seriously.
You can have defenses to this type of claim. But if you don’t act quickly, you could lose your valid defenses.
We are dealing with several of these — some we can defend and some we are about to sue the debt buyer as they are collecting on a debt that was already paid off. The level of sloppiness in these old second mortgages is startling. So you will have options but if you ignore this situation, there can be bad consequences.
If you’re dealing with an abusive debt collector who claims to be collecting on an old second mortgage, and you aren’t sure what to do, call us at 1-205-879-2447.
We will gladly help you decide your plan of action.
I look forward to talking with you.
Have a great day!