Can a Lender Just Sue the Borrower on the Note?

A lender cannot sue on a debt secured by a mortgage or trust deed except for a judicial foreclosure. This is called the 'one action rule' or 'one form of action rule'. One exception to this rule is if the security for the loan has become 'valueless' after the lender's security interest was recorded (a 'wiped out' junior lien holder.)

In this case, the lender can sue directly on the debt (note) unless the borrower's loan was used to purchase a residential 1-4 unit dwelling all or part of which is owner occupied or if the purchase money loan for any type of real property is financed by the seller and secured by that same property.

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