Second still trying to collect after short sale

[Dyrol Harding]

In NYC can the second mortgage continue trying to collect after the short sale? How can a person stop continued attempts to collect?

[Dion DePaoli]

This seems to have gotten a bit confusing for frankly a simple concept.

A "Short Sale" is the sale of real property from one party to another. The 'Short' refers to the Mortgagee taking less than the total balance due to satisfy the lien. If there were two leins, both leins would have to release their lien position on the real property otherwise the Buyer would not get clear title.

In the event, the Second lien did not agree to satisfy their interest in the real property, then the transaction would be considered a Subject To transaction, since the Buyer's interests would be Subject To the existing lien. This would mean the second lien is still attached to the property. In the OP, this does not sound like the case. Therefore, no foreclosure action could be further pursed, since there is no longer an interest in the real property to foreclose on.

Deficiency waiver in a first lien is common and usually found within the paperwork. Deficiency waiver in the second lien is somewhat common however it is also not uncommon for the second lien holder to not waiver deficiency. This is what sounds like took place. It is possible, that a waiver of deficiency was accepted by the second and they are simply trying to collect on something they no longer can, however that is not all that common of a mistake.

As such, the suggestion above relating to the issuance of a letter to the second lien holder regarding collection attempts is the best response. Fact of the matter, if the Borrower did not get a waiver of deficiency from the second lien, the amount due is still due. It is just not attached to real property any longer.

Usually the agent(s) involved help negotiate a waiver of deficiency for the borrower. In addition, the Seller usually reads the paperwork which will also state exactly, as Wayne mentions, what is happening with the outstanding debt.

IMO, you don't need a lawyer to read you your paperwork. Pull it out and read what the second lien holder put. I am pretty sure you will find, you agreed to reaffirm the debt which they agreed to release on the Subject Property but not release you personally. The debt is now unsecured. Collections on all debt must follow the law and the Fair Debt Collection Practices (rule can be read HERE) will dictate further correspondence between the creditor and debtor.