I had an 80/20 loan for my home (in AZ) that was foreclosed on last year (sold in auction).?

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Both loans were with the same bank and purchase money. I have been receiving creditor calls, I assume for the second mortgage. They took my home, what more do they want. Do I have any options here? It was my understanding that they could not come after me for purchase money loans in AZ. What should I do? Are they going to sue me? Am I going to have to pay back the 2nd mortgage for a home that was taken from me?

We are in negotiations on a owner finance deal. This would be our second home purchased this way. The first time the seller defaulted on his loan and the house was foreclosedd on. So, this time we are asking the seller to allow us to make our payments to her mortgage company or show us quarterly statements showing the mortgage payments being made or we could put something in the contract that says we would get all out money back if her mortgage goes into default for non payment. The seller doesn’t want to do any of these things. What other ideas could we suggest?

7 Comments
  1. Reply
    Tigg
    February 24, 2011 at 12:18 pm

    Of course they are going to sue you. You owe the money. You signed a contract agreeing to pay it

  2. Reply
    GVD
    February 24, 2011 at 1:07 pm

    Arizona is a non-recourse state so the property secures the debt. On an 80/20, the second is still purchase money so unless you refinanced that, they should not be coming after you. Please note that if you refinanced the 2nd, even if you didn’t take cash out, you will still have changed it to a recourse loan.

    Make sure to consult an attorney for legal advice as I am not one.

    Edit:
    Also, ignore “Mr Realestate guy” who says 2nds are recourse and links a page about HELOCS. Helocs are recourse because they tap equity, a 2nd at purchase, as in an 80/20 is PURCHASE MONEY and thus NON -RECOURSE.

    Edit again for Landlord.

    THe 20 in an 80/20 is NON-RECOURSE and PURCHASE MONEY.

    Here’s a link so you can finally understand and stop giving TERRIBLE and INCORRECT advise.

    http://www.garystickell.com/articles/arizona-antideficiency.htm

    “Purchase Money v. Non-purchase Money. The mortgage used to finance the purchase of the house is a purchase money security interest and is uncollectible after the foreclosure. A second mortgage may also qualify as a purchase money loan if it is also used for the initial purchase of the residence. Examples of purchase money second mortgages are carry-back notes from the seller or the “20″ of an “80/20″ loan.”

  3. Reply
    real estate guy
    February 24, 2011 at 1:39 pm

    WTF The home wasn’t taken, YOU LOST IT BECAUSE YOU DIDN”T PAY YOUR BILLS! lets just get this straight.

    In regards to “what more do they want”. They want their money that you promised to pay. PERIOD.

    AZ is a non-recourse state. This means that lender can’t come after you for the FIRST mortgage. However, 2nd mortgages are not covered http://www.helocbasics.com/what-happens-to-a-heloc-in-case-of-default-or-foreclosure/

    I would get your head out of your … and face this problem. It’s time to talk with a lawyer.

    Even if you don’t pay it, the IRS will tax you on the 2nd mortgage loss as income. (not the first).

  4. Reply
    Landlord
    February 24, 2011 at 2:09 pm

    They want the money. They gave you cash money, they did not want your house, they want their money back.

    You still owe on the 20, it was a loan to cover the down payment, not “purchase money”, the purchase is the 80 and covered by the house.

    Instead of assuming why they are calling you need to talk to them, see what they want to work out.

  5. Reply
    My Take on It
    February 24, 2011 at 3:01 pm

    Walk away

    If they are not willing to prove to you that they are keeping up the mortgage payments, that probably is a bad sign. Chances are, you would end up in the same predicament you were in with your last owner financing deal.

  6. Reply
    Judy
    February 24, 2011 at 3:39 pm

    Funny, to me that sounds like the seller hasn’t made payments in months.

    Will you have a lawyer do a title search and a make sure that loan is paid up?
    Why would you want to do this without a mortgage company handling your loan?
    /

  7. Reply
    Credit Expert
    February 24, 2011 at 3:54 pm

    It could be that the seller is behind in the payments, but it also can be they have a “Due on sale clause” in their mortgage note. If the mortgage co. found out you are buying the house under owner financing they can call in the note, and demand balance in full or foreclose.

    You may want ot consider a Contract for Deed deal as an alternative. This is basically rent to own.
    You and seller agree on a sales price. You receive part credit on rental payments to apply to the down payment. When the lease term is expiring you do a refi into your name. The lease w/need to be recorded at the County register of deeds.

    See below websites.

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