I have come across a new trend and I need to alert you to it. Debt collectors are trying to collect on non-recourse loans. Let me explain.
When you take out a mortgage, any mortgage you use to purchase the house is called a "purchase money mortgage." It could be a first mortgage or a second mortgage, or more commonly, both. A purchase money mortgage in California is considered non-recourse. In other words, if the house is foreclosed on, a purchase money mortgage holder cannot come after the borrower for the unpaid balance.
Well, debt collectors are trying to get more creative in how to collect money. So, what are they doing? Calling consumers who have non-recourse loans and trying to collect money anyway. Yes, they are trying to collect money that they are not entitled to collect.
These practices are not legal and the consumers do not owe this money. If you have faced a foreclosure and you have a purchase money mortgage, you do not owe this money. If you are contacted by a debt collector, you need to talk to an attorney to have your mortgages analyzed and confirm that it is a purchase money mortgage.