ANSWERS: 2
  • Due to homestead exemptions, a bank can usually only foreclose on the property that they provided the funding for. However, a creditor can put a lien on the other property. Thus, if you ever do sell or refinance the other home, the encumbrance will limit what you get. Note: A court in one state cannot create an order that affects property in another state. However, the full faith and credit clause of the Constitution allows for the creditor to register a judgment in another state, and have the other state order an encumbrance.
  • It is unlikely that would happen. Many states, including California, have "anti-deficiency" statutes that forbid the holder of a mortgage or deed of trust from seeking any further monetary damages after foreclosing on the property that secures the loan. This is true even if the value of the property is less than the amount owed on the loan. In essence, the lender must make a choice: either take the property to settle the debt or file suit and seek the money itself. Please look into the applicable law for the state in which your properties are located. Moreover, as Anonymous states in his answer, there are homestead and other legal protections as well. These protections vary widely depending on the state, though, so you should do your research.

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