After foreclosure Can the 2nd Mortgage Holder Come After me for the Balance (Colorado)?

Written by James Hirby | Fact checked by The Law Dictionary staff |  

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First, seriously consider hiring a lawyer who knows the foreclosure and multi-mortgage law in the state of Colorado (or, your particular state). Each state varies in some way. Next, in a foreclosure, the holder of the first mortgage gets paid off first (of course), then, if any money from the foreclosure sale is left, it goes to the holder of the second mortgage, and so on. Once all mortgage holders are paid off, any money left goes back to the debtor. Now, if only the holder of the first mortgage gets money, and there is no money for the holder of a second mortgage, the situation gets tricky.

A good source to begin with is this site: [http://www.realtytrac.com/foreclosure-laws/foreclosure-laws-comparison.asp]. It shows that Colorado foreclosure law allows both “judicial” and “non-judicial” foreclosures. Judicial means that the courts are involved. Non-judicial means a trustee is assigned and conducts the foreclosure actions. This is important because each mortgage holder must decide to do one or the other is its pursuit for financial retribution in a foreclosure. In choosing non-judicial, the holder of a mortgage accepts a fast-path process to selling the asset to pay off the mortgage. In choosing the judicial process, the holder of the mortgage takes a slower, more methodical approach to retribution. Rather than a quick sell, the mortgage holder can better assess how to approach liquidation of accessible assets and gain a more complete satisfaction. The choice between judicial and non-judicial is even more important to the holder of a subordinate mortgage. The answer to the question: “How likely is the sale of assets to pay off the holder of the primary mortgage to have sufficient excess assets to pay off the one (or more) mortgage(s) above mine, and fully or sufficiently payoff mine?” If the answer is not likely, the subordinate mortgage holder will want to go the judicial route and file for a deficiency judgment, allowing pursuit of assets the primary mortgage holder could ignore. Another point to consider is whether or not the debtor has sufficient assets to warrant a judicial approach. In most states, the holder of the mortgage has one choice and only one choice. There are a few states where the mortgage holder can purse the non-judicial process, and if not completely paid off, pursue the deficiency judgment.

The lender who went the non-judicial and did not get satisfaction often will try to burden you and make you believe that they can pursue you to squeeze whatever money they can out of you. But, by law, the only way they can come after you and your assets is if they can have a court hearing and get a deficiency judgment against you.

To summarize: the first step you should take to consider a good foreclosure lawyer, and then finding out if your foreclosure went through a judicial or non- judicial process. If it was non-judicial this second mortgage holder has no legal grounds to come after you. They are just trying to scare you into giving them money.

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