Mesa, AZ asked in Consumer Law, Contracts and Foreclosure for Arizona

Q: is it legal for 2nd mortgage to foreclose, buy the house at auction, not payoff 1st mortgage but pay monthly payment?

8 years after my 2nd mortgage forclosed I found out the frst mortgage loan which was an fha, is still in my name. The loan is active and payments have been made by someone without my knowledge for 8 years. My name is listed on the contact information but the contact adddress and phone is that of the lender who foreclosed. So basically my home was taken but I still own the loan. This is preventing me from qualifying for a loan to purchase a new home and I'm sure may have other ramifications. Neither my mortgage broker or my real estate agent has ever seen such a situation so I need advice on how to proceed.

1 Lawyer Answer
Diane L. Drain
Diane L. Drain
  • Phoenix, AZ
  • Licensed in Arizona

A: This happens all the time. The first loan has not been paid off, therefore there is still debt owing - by you. If this is Arizona property, under 2 1/2 acres, then lender can foreclose if the loan is not paid, but they cannot sue you. That is the good news. The bad news is that you still have a debt, even though you do not have the home. The second mortgage had a right to sue you (assuming this was not a purchase money debt), but it does not appear there was a deficiency, otherwise they would have already done so. The new owner of the home will continue to pay as long as they want to keep the home.

As far as "advice on how to proceed", there is no option. Try going to a lender that understands your situation.

I really wish I had better news.

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