Do the lenders on my rental homes have a recourse to lien my primary house?
Author: Rob K. Blake | Date: June 16, 2008 | Filed In: Foreclosure Answers
Here’s the whole question:
“My primary house was cash-out refinanced to pull out the equity to buy another house free and clear. Later I pull the equity out of the 2nd house and bought a 3rd house. Now it’s so hard for me to pay 2nd and 3rd house due to hardship and bad renters and foreclosure is a real possibility. Do the lenders on my rental homes have a recourse to lien my primary house if I default on their mortgages? Please help, I am stressed and I don’t want my family to be homeless.”
Attaching “Other” Liens To Residence
The only way you can directly lose your primary residence is if you stop paying on any mortgages that lien it. Residence mortgages usually are only a lien against one property…your home.
However, if any of the mortgages you signed on the rental homes were what is called a “blanket mortgage” …a mortgage that liens more than one property, and the “other” property they liened was your home…well then you’ve got a problem.
You could also have a problem if the lenders on the rental homes forecloses and due to a short fall at auction decides to pursue a “deficiency judgment” and then liens your primary residence to perfect the judgment.
In many states, income property do not have the same protections against deficiency judgments as primary residences do. Of course, it takes going to court a second time to get the judgment, but assuming they prevail, it could put your home in jeopardy…or any other asset accounts like bank accounts.
They could even attach your wages or garner the rents paid by your tenants.
They can’t force you to sell it with a judgment lien, but the lien could prevent you from refinancing or selling since the judgment like the mortgage gets paid out of the sale or refinance proceeds.
It is highly unlikely given your description on how you purchased your investment properties that you have a blanket mortgage on your rental properties, but it wouldn’t hurt to read the mortgage notes again to be sure.
Better yet, get an attorney to review them for blanket mortgage terms or any other unfavorable terms like deficiency judgments foreclosure can bring.
Great question!
Good Luck!
Author: Rob K. Blake
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