I went to seminar today regarding short sales & heard something I hadn't picked up on before - that a recourse 2nd isn't really forgiven when the 1st is & the bank can come back several years later and try to collect on that 2nd or obtain a judgement which is why seller's should consult a bankruptcy attorney in this case prior to a short sale. Do I have this right? Can someone further explain?

In California I thought the bank can't come back for a deliquency judgement on a purchase money loan. Meaning if the 2nd was used only to buy the property they bank has no recourse. But if it was taken out after the purchase I believe they can attempt to collect it.

That is my understanding

I think you're right...if it was say an 80/20 loan to purchase it's fine. But if there was a refi or just a 2nd taken out later, I guess that can still come back to haunt the seller unless and if it was part of bankruptcy? The example given today was that a seller may think that after a short sale was completed (& not knowing how a recourse 2nd is treated) they work to get credit back on track, wait 2-3 years to buy again and find they can't because the 2nd is coming back for their money and at that point bankruptcy may not be an option if they can afford to pay back the debt. It would surprise many sellers who think that debt was forgiven and it really wasn't.

I believe in CA if there is a recourse 2nd that has rights to a deficiency suit, that 2nd holder has a 3-month limitations period in which to sue following foreclosure by a senior lienholder. So, it's unlikely that the matter will drag on for years in limbo. Either the 2nd holder will sue on the note for the deficiency within the time allowed, or else treat the matter as canceled debt (which might have tax implications to the debtor unless debtor can meet exceptions in the tax code). (not legal advice, go hire a lawyer)