[WSBARP] Deed of trust and foreclosure

[Eric Nelsen]

Actually, I haven't run into this issue either. But in concept I agree that PC still owes the money, though it is now an unsecured debt. My reasoning is: The Agreement is a contract and money owed under its terms enforceable regardless of whether or not PC gave a security interest in property to the lender as well. The lender could sue and get a money judgment against PC, then garnish bank accounts, etc.

If the equity lender had been the one to foreclose and take the property, that likely would have wiped out their ability to collect, since they probably would have been prohibited from getting a deficiency judgment. But because the equity lender's junior lien was simply extinguished as a result of the senior lender's foreclosure, I am pretty sure the equity lender debt is still valid and enforceable.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com

From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Timothy Lehr
Sent: Tuesday, November 26, 2019 2:17 PM
To: wsbarp at lists.wsbarppt.com
Subject: [WSBARP] Deed of trust and foreclosure

Real Estate attorneys,

PC owned real property with a mortgage and deed of trust securing the debt. PC subsequently took out a line of credit on the real property, signed a Bank Equity Maximizer Agreement (line of credit agreement), and equity lender secured debt with deed of trust on same property (inferior to first mortgage).
PC then defaults on first mortgage and property is eventually foreclosed and sold at trustee's sale. Bank buys the property at the trustee's sale then sells it to third party. Both deeds of trust are wiped out, but PC still has this Equity Agreement and has been paying on it.

PCs question is whether he is still required to pay on the line of credit. It has not yet been paid off. The agreement and deed of trust seem to be silent on this point. My assumption is the lender could still enforce the agreement that was signed even though the security instrument has been removed from the property. I also assume this situation comes up pretty regularly, but it's my first time looking into it. Any thoughts are appreciated.

Tim

Timothy C. Lehr
Attorney at Law
Stiles Law Inc., P.S.

p:   360.855.0131
e:   timothy at stileslaw.com<mailto:timothy at stileslaw.com>
w:  www.stileslaw.com<http://www.stileslaw.com>

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