Q: Please let me know if a first position lender can revoke a loan if a second lien position is secured on a SFR.

A: Thank you for your question!

Probably your broker is suggesting a refinance. This way the service loan pays the first, and releases it.

This is merely a discussion of general laws and not legal advice. For legal advice, more specific facts and investigations are needed. I recommend you consult with an attorney for more details.

A: To answer this question accurately, we need to consider a few key points about mortgage lending practices and California law:

1. Loan agreements and due-on-encumbrance clauses:

Most first position mortgage agreements include a "due-on-encumbrance" clause. This clause gives the lender the right to call the loan due (not necessarily revoke it) if the borrower takes out additional loans against the property without the lender's permission.

2. Lender's rights:

If such a clause exists in the loan agreement, the first position lender could potentially accelerate the loan, requiring full repayment. However, this is different from "revoking" the loan outright.

3. California law and restrictions:

California has some protections for borrowers in place. For instance, the Garn-St. Germain Depository Institutions Act of 1982 limits a lender's ability to enforce due-on-sale clauses in certain situations, though this may not directly apply to additional encumbrances.

4. Practical considerations:

In practice, many first position lenders may not take action if a second mortgage is obtained, especially if the borrower continues to make payments and the property maintains sufficient equity.

5. Disclosure and permission:

It's generally advisable (and often required) for borrowers to inform their first position lender if they plan to take out a second mortgage. Some loan agreements may require explicit permission.

Given these points, while a first position lender typically cannot "revoke" a loan simply because a second lien is secured, they may have the right to call the loan due if their loan agreement includes specific provisions about additional encumbrances.

The broker's suggestion is somewhat misleading. A more accurate statement would be that securing a second mortgage without the first lender's knowledge or permission could potentially lead to complications, including the possibility of the first lender demanding full repayment of the loan.

For the most accurate advice tailored to your specific situation, it would be best to:

1. Review the terms of your first mortgage agreement carefully.

2. Consult with a real estate attorney who is familiar with California mortgage law.

3. Communicate with your first position lender about your plans for a second mortgage.

Remember, the specific terms of your loan agreement and the lender's policies will ultimately determine what actions they can take in response to a second mortgage being secured on the property.