There is no end to the troubles of homeowners – second liens are continuing to haunt them even after they have lost their houses to foreclosure. Jorge is one of the victims. He is a construction worker. He got a threatening letter that for the second loan on the house that he has already lost, he owes $78,000.
Jorge was so embarrassed that he did not disclose his full name. He said, “I was afraid and felt pressurized. I called them to say I had already lost the house in a foreclosure. They told me it doesn’t matter; you have to pay the money anyway.” He was communicating in Spanish with the help of a translator.
The story of Jorge is common. There are numerous in the same boat. Debt collectors are honing in on people who have seen their houses swallowed up by foreclosure or short sale because of unpaid second mortgages. The sale proceeds did not cover that amount.

The rules differ from state to state. In California foreclosure proceedings in general erases the obligation of the borrower on the first mortgage. But the other liabilities remain. Noah Zinner a lawyer of Housing & Economic Rights Advocates of Oakland said, “We’ve seen a lot of folks coming to us, saying, ‘I was foreclosed on, now these people say I owe $150,000 for my second loan; I thought everything was going to go away, what do I do now?’”
Many analysts think that this trend will pick up speed causing the pain of foreclosure to continue and linger.

Shannon Jones a lawyer of Danville who is handling several such cases relating to post-foreclosure blues said, “I think the other shoe is going to drop soon. In the next two years we will see a huge volume of (debt collection on) second loans. We’re seeing a number of lenders start filing suit or turn them over to collection companies.”

The laws of California (it being a non-recourse state) do not allow lenders to chase borrowers for unpaid dues on home mortgages. But it is different for loans that have been made for other purposes. The lenders can follow up the matter for any length of time from four to six years.

Jorge took the second loan to purchase his house and hence it is non-recourse due for which he cannot be sued for non-payment. He can be asked by the debt collector to pay of his own accord.

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