List of non-recourse mortgage walkaway states

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These are all the mortgage walkaway trustee sale states, meaning they are non-judicial foreclosure states.

In those states, generally, when they foreclose on you, they cannot pursue you for their financial losses.

Many, such as California, do in theory allow a lender to choose judicial foreclosure but in those cases the lenders only do so if a borrower has significant other assets. This is the "one action" rule that lets the lender either pursue non-judicial foreclosure, at lower cost and less time, or judicial foreclosure that costs more money and takes more time but lets them go after you for their financial losses.

District of Columbia (Washington DC)
Montana (as long as non-judicial foreclosure is used)
Nevada - note that the lender CAN get a deficiency judgment (See below)
New Hampshire
Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
West Virginia

These are states that also allow non-judicial foreclosure, and/or where non-judicial foreclosure is more common and deficiency judgments can be obtained more easily:
North Carolina
Rhode Island
South Dakota



See also foreclosure and second mortgages, and also, will a short sale hurt my credit, and also using an expert for your short sale.

Also, see walkaway from your mortgage.

Also see mortgage forgiveness - will you pay income tax on your foreclosure?

If you want to stay in your house and reduce your payments, see lower your payments without getting a new loan.

Caution: Use this list at your own risk. Updated on 9-June 2008. Bookmark as we will update within two weeks.



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244 Comments on List of non-recourse mortgage walkaway states

carol @ 11:10 am:

Got a statutory cite for Montana? I'm having trouble locating the actual language.

Lawyer @ 11:11 am:

Nevada is a recourse state, not non-recourse. Your listing of Nevada as non-recourse is incorrect, and providing people the wrong advice.

Deficiency judgments can be obtained on all foreclosed deeds of trust: NRS 40.455

Mark @ 3:27 pm:

Note that Washington state law allows for a choice of remedy - nonjudicial (quick) foreclosure, no deficiency; or judicial (slow) foreclosure, with deficiency available. Rev. Code Wash. 61.12.050 additionally provides "When there is no express agreement in the mortgage nor any separate instrument given for the payment of the sum secured thereby, the remedy of the mortgagee shall be confined to the property mortgaged." So borrower has to have agreed that deficiency is available.

Washington law also provides that for loans secured by deeds of trust (rather than by mortgages), which means virtually every residential loan, "Except . . . for deeds of trust securing commercial loans, a deficiency judgment shall not be obtained on the obligations secured by a deed of trust against any borrower, grantor, or guarantor after a trustee's sale under that deed of trust."

Non-judicial foreclosure of consumer deeds of trust are far and away the most common in Washington.

Richard Geller @ 11:14 pm:

In the non-recourse states, such as California and Washington state, the lender may pursue judicial foreclosure instead of non-judicial foreclosure. But in reality most do not. So as a practical matter, they are listed as non-recourse states.

Richard Geller @ 11:18 pm:

Thanks on the Nevada statute which reads:
NRS 40.455 Deficiency judgment: Award to judgment creditor or beneficiary of deed of trust.

1. Upon application of the judgment creditor or the beneficiary of the deed of trust within 6 months after the date of the foreclosure sale or the trustee’s sale held pursuant to NRS 107.080, respectively, and after the required hearing, the court shall award a deficiency judgment to the judgment creditor or the beneficiary of the deed of trust if it appears from the sheriff’s return or the recital of consideration in the trustee’s deed that there is a deficiency of the proceeds of the sale and a balance remaining due to the judgment creditor or the beneficiary of the deed of trust, respectively.

Richard Geller @ 1:04 pm:

"Nevada is a recourse state, not non-recourse. Your listing of Nevada as non-recourse is incorrect, and providing people the wrong advice.

"Deficiency judgments can be obtained on all foreclosed deeds of trust: NRS 40.455"

Fixed. Thanks!


Richard Geller @ 1:09 pm:

I added Montana:

Code Ann. 71-1-222 to 71-1-235, 71-1-301 to 71-1-321

Montana is a no-recourse state as long as non-judicial foreclosure is used.

Matt @ 7:16 am:

I have read that Rhode Island can seek a deficiency judgment. Can you show me otherwise?

Richard Geller @ 9:19 am:

Yes, Matt, you are right. Rhode Island allows a non-judicial sale of property and allows for a deficiency judgment so I corrected the list. Thanks!


Mark St James @ 1:23 pm:

I have read that Utah can seek a deficiency judgement as well - can you verify ?
Thank you very much !

Richard Geller @ 3:30 pm:

Yes you are right. Corrected.

Cane @ 10:32 am:

I have 2 questions:

1) In forclosure, specifically in CA, and the loan is not purchase money but a refi and if the borrower has more than 1 property, does the foreclosing bank have any recourse on those other properties, wether the money was loaned w/ that bank or not?

2) Most banks will not even talk to you until you are delinquent anyway so how can you get that repaired on your credit if someone does go the short sale route?

Richard Geller @ 12:52 pm:

Hi Cane, the foreclosing bank in California has an option to do judicial foreclosure. But rarely do they do this because it is slow and expensive. I have seen it done with investor owned houses if an investor has a ton of net worth somewhere else.

A short sale can be done without missing a payment. It does not hurt your credit as badly as many people seem to think, especially if you do it without being late and without a foreclosure notice being filed.



chip @ 2:35 pm:

see the Harvard Professor of Economics, Martin Feldstein's article in Financial TImes Thursday May 8 Comment… academics are not as bright as they would like you to believe… amazing lack of knowledge…

"Because US mortgages are "no recourse" loans (lenders have no recourse to the house's owner beyond the value of the house), individuals with negative equity have an incentive to default."

And this is from one of the most highly touted economic minds in the US!

Richard A. Lawhern @ 7:24 am:

My son is broke, out of work, without assets, and has credit card debts over his head. He and his wife and two kids live in West Virginia. His first mortgage bank has referred his loan to a Virginia law firm for collection under non-judicial foreclosure proceedings. He also has a second trust deed mortgage with another finance company - part of the original "first time home buyer" package that he bought into at the peak of the insanity of the 2005 real estate speculation bubble. If I am reading your site and others correctly, he has no realistic prospect of doing a short sale. And the holder of his Second Trust Deed Mortgage 3-year ARM note can come after him for a deficiency judgment even if the first mortgage holder can't because of "no-recourse" provisions.

He bought a property for $220K that was almost certainly over-appraised (as were many in his area) even at the time. The primary mortgage was $180K, the second was $40K (he also got an unacknowledged personal loan from a family member to pay $5K in closing costs). Wachovia and FMSC pretty clearly failed to do due diligence when they qualified him for the original loans. I doubt if anybody will ever be able to prove predatory lending practices, though I personally think a few of those bank officers should do long prison terms for fraud.

All of those things being said, do you see any indications from what I've told you, of a route my son might take out of his mess, that doesn't leave a ~$50K deficiency judgment hanging over his head for the rest of his life? From looking at real estate listings in his area, I also doubt that his property will bring even $150K in foreclosure auction sale.

Thanks for any comment you care to offer,

Richard Geller @ 7:40 am:

Richard, why wouldn't your son have a good chance of doing a short sale? That is what I would suggest he consider. It is a better deal for him and the lenders, quite possibly.

And, really, a deficiency judgment is an unsecured debt that can be discharged quite often in bankruptcy. They have outlawed debt slavery in the United States. I think your son has more options. My work involves helping people help themselves and frequently avoid bankruptcy, but that is the big stick that the lenders understand. It gives your son bargaining power.



Richard Geller @ 7:44 am:

Chip, as your wrote, "Because US mortgages are "no recourse" loans (lenders have no recourse to the house's owner beyond the value of the house), individuals with negative equity have an incentive to default."

Yes, indeed, there is so much misinformation out there. I frequently hear confusion even in very bright minds.

Although there is a grain of truth in some of this. Feldstein's remark should more properly be, "in some states such as California, lenders have no recourse on a first mortgage and so this gives the borrower with negative equity an incentive to default."

Indeed this is true. Not on a second mortgage, generally. And not in all states. But in some states it is true. And that is in my mind what makes the swings between boom and bust worse in California.

It also perhaps gets things sorted out quicker. It may crash more quickly in California, but it may recover more quickly too. Who knows.

Much of time time in mortgage short sales I am seeing lenders ask for a personal note for the deficiency. The first mortgage holder often doesn't do this because they lack recourse anyway. But the second mortgage holders are doing it all the time. Something stinks about the whole deal.



Paul @ 10:10 pm:

If there was no cash out done on a second mortgage, can there still be a deficiency judgment. I am in California and refied my purchased money HELOC to a fixed rate without pulling any cash out.


Richard Geller @ 6:35 am:

Yes, you can be liable because you signed a note. The lender secured the note with a second mortgage, actually not a mortgage but a deed of trust…merely a technicality. The lender won't foreclose if there is no equity left. But they can sue you in civil court as a simple collection action and get a jugment and pursue assets, garnish wages, etc.



Teri @ 6:04 pm:

I want to be sure I understand this, In Washington State, what if there are two deeds of trust (one initial mortgage, and the other a Heloc…with a different lender). How does the defiency law work? Thanks.

Walt Watson @ 1:59 pm:

I've been reading's currently posted 411 negative association comments from disguntled Homecomings Financial borrowers. Being one myself, one who fell into the sub-prime lender's frenzy of loans in 2005, I'm currently considering walking away from my townhouse. My mortgage (first and only) is upside down, especially after the attorney's fees are added in and my payment is more than I need to be paying AND has a huge 12.25% rate. I just received the attorney's notice of sale date of 7/15. I can rent a larger home for 1/2 the cost. Homecomings keeps running me through a seemingly never ending cycle of re-payment plan possibilities whereas you send them $1,550.00 two or three months in a row and "we'll see about it" but I get a feeling they have no intention of re-structuring. Are you sure Alabama is a no-recourse state and what do you think about my walking away? I'm not concerned about my credit score as it's already shot. Thanks.

Richard Geller @ 2:07 pm:

Walt, I think Alabama shouldn't be considered a walkaway state.

A bit of additional research shows they can get a deficiency judgment.

As to your situation…lenders like you to keep paying so they do not have to report the loan as non-performing. I say "lenders" but really it is mortgage servicers.

I would consider a short sale if you can. If you don't want to do a short sale, you might want to walk away and bankruptcy would be an option as deficiency is an unsecured loan.


Walt Watson @ 12:26 pm:


Thanks for your input. The law firm handling the sale sent me a copy of the foreclosure notice to be published Thursday and it states "This property will be sold without warranty or recourse, expressed or implied as to title, use and/or enjoyment and will be sold subject to the right of redemption of all parties entitled thereto." Does this mention of "without recourse" refer to a deficiency judgement?


Richard Geller @ 6:37 am:

Hi Walt, without recourse meaning matters of title. The buyer can't change their mind afterwards, or sue. It's an "as is" kind of thing


Walt Watson @ 7:22 am:

Good Morning Richard,
You are such a valuable asset and I really appreciate your help. If you ever need any architectural advice, just let me know. My lender has developed a mean demeanor the last couple of conversations I've had with them, and as I begin to come to grips with walking away, I feel less stress. Although I would prefer my lender would just grant me a 30 yr. fixed 7% +/- conventional mortgage that I could afford in lieu of the ARM (currently 12.25%) I currently have, apparently they would prefer to sell my property at a loss. The foreclosure notice was published today with two more weekly publications to follow prior to the courthouse steps sale on 7/15. I understand bidders are not allowed to view my property until after the sale as it is still owned by me. If the lender comes after me for a deficiency judgement then I guess I'll file for bankruptcy as I'll still need 7 years to rebuild my credit due to the foreclosure anyway. What an economy! Again, thanks for your advice!

Sincerely, Walt Watson

Patty @ 10:01 pm:

With regards to the State of Nevada being a recourse state or non-recourse State, a husband is deeding his half(50%) of the property to the wife, as a settlement in a divorce. The settlement has been drawn up and the verbage in the settlement states that the wife, who has been deeded the property at 100% is required to re-finance within 60 days. This would protect both parties from any issues in the future. The wife is having a complete breakdown. If the wife defaults, is late, etc. and the husband is still on the loan, however is able to show that the divorce states that he has no interest in the home what so ever, and that the county recorders office also shows that the wife now owns the property at 100%, is the husband still liable? What are the consequences with recourse versus non-recourse. Thank you

Mike @ 3:07 pm:

My mother has an investment property (condo) that is 100k upside down. It has no renter and she is paying $3500 out of her pocket every month which she can no longer do. She wants to walk away but fear that the lender will come after her primary residence (in Virginia) that is paid off for the difference. What options are available to her and which do you feel is best? Does your mortgage relief formula cover this scenario and offer a solution? If so, I am definitely interested in purchasing your mortgage relief formula. Thanks in advance.

Pamela @ 5:10 am:

I live in Alaska and can no longer afford my mortgage. I have a second mortgage and a $20,000 line of credit. I also have a $5,000 loan (unsecured), and a credit card with the same bank my mortgage is held. I have tried twice to refinance but the bank wouldn't due to my falling credit rating. The mortgage is an ARM and the payment for the next 5 months has been lowered by $90 but that could change in December when the 6 months are up. If I have to walk away from the home, but continue to pay the bills on the $20,000 line of credit, the $5,000 loan and credit card - will the bank allow this and forclose on the home without recourse? Or am I better off just turning the keys over to them stating I'll pay these 3 bills but cant afford the house? Thanks so much, really stressed here.

JUN @ 2:31 am:

Hi there, I live in California and my question to you is: What would happen if the lender modify (not refi) a purchase money second mortgage due to hardship? Once it's modified, is it still consider a purchase money loan (non-recourse loan) ? Thank You

The whole thing about "purchase money" in California is the result of a faulty reading of the law. In California, any foreclosure done non-judicially, that is, through a trustee sale, can NOT result in a judgment against the borrower. Whether it is purchase money or not.

Of course, these days, many lenders are not foreclosing on second mortgages. If the first forecloses, the second has their position wiped out. And they can pursue a borrower for breach of contract in civil court.



GLORIA @ 1:01 pm:

I have a purchase money heloc(2nd) and took 3,000 equity out. Am facing foreclosure and wondering if that action changed it from a non-recourse to recourse loan and I can be sued for the amount of the loan by the lender.In California. Thanks, Gloria

In California, there really is no difference between purchase money and non purchase money loans, AS LONG AS THEY FORECLOSE USING A TRUSTEE SALE, that is, non judicial foreclosure. That is normal in California anyway.

However, most folks find they have personal liability for second mortgages because the second has no equity. So they can exercise their "one remedy" and pursue the borrower in civil court. You signed a note personally, and the collateral is worthless, so they can sue you.

They will however deal in many ways. The short sale will reduce the balance you owe them a little, and they may require you to sign a note for some of their losses.



SHARON @ 12:29 pm:


If you are in the real estate business get the Pro edition.



Don @ 4:58 pm:

Partner and I purchased investment condo in Florida in June 2007. Developer abandonded project after 25+- closings of 100 units. Development Lender still has not foreclosed project and have reciever on site. Title Company [deleted] issued titles without getting lien waiver. Multiple liens then filed by un-paid contractors. [Title company] says they will insure subsequent buyers, but there is no market at this time for units. Certificate of Occupancy was recinded after the 25 closings [county issued "tempoary CO's so developer could require unit closings, which was part of contract and common practice]. Probably upside down at least $150-175k. Currently making payments on time with lender. This is not a primary residence for either of us. We believe the developer knew he was going out, and closing agent was subsidiary of developer [deleted]. Something smells…..Suggestions???

It sure does sound like it smells. But a short sale may be your best option. At least the title company will issue a policy, that's very good. You could see a lawyer of course, one specializing in suing developers. I don't know how deep the developer's pockets are of course. My suggestion would be to see a lawyer and consider a short sale. There is usually a market at some price, and you can use my 9 Day House Sale to find that price, quite often, and sell. Then you have a purchase agreement that is subject to the lender approving it. So you go to the lender and explain the situation and say "here is an offer. It is a very good
offer considering the alternatives" and quite often they accept the offer.

This is much harder to do as long as you are current on payments, unfortunately.



Don @ 2:28 pm:

re: Condo in Florida email sent 9/9.

Lender is Wells Fargo and everything I read indicates that they are not cooperating in short sales. Any info on this?

Brad @ 10:31 pm:

Hello, I purchased a home in 2005 (First loan + Mortgage Insurance), in 2006, I refinanced the First and took out a second, to get rid of mortgage insurance and make the total new loan an 80/20. Since the second loan (50K) taken out was not refinanced, is it a "purchase money loan"? Will they pursue a deficiency judgment here in California? What is the cost of a deficiency judgment to the second, is it worth it to them? If I continue to pay the $360 payment even after the first goes into foreclosure, will this prevent any judgment from the second, or will they seek the entire balance at once when the home forecloses? I have a second home a rental down the street, with little equity, can the second go after that home, my car, my savings, retirement or paycheck? Lots of questions and lots of confusion. If a short sale offer comes in at 417K the balance of the first, what happens to the second due to the conditions mentioned? Do I have to have the second agree to a short sale? Why cant I just advertise the home plus the reality fees, pay of the first without a deficiency and keep making payments on the second at 360/mo in-order to protect my credit?

In California, if they foreclose on you non-judicially it DOES NOT MATTER if a loan is a purchase-money loan or not. They CAN NOT get a deficiency judgment on ANY NON JUDICIAL FORECLOSURE. Period.

Do a short sale, work it out with the second, and walk away from this millstone. The second can go after you in many cases, even in California, because they won't foreclose. The first will. So you have to negotiate with the second. That isn't that hard to do and you can get your life back and start moving forward again.



BJ @ 5:49 pm:

Aloha! Richard,

Your website is very helpful. If not too much of an imposition can you shed light on my situation? I live I Hawaii and have a first mortgage balance of $ 589,000.0 and a second HELOC for $149,000.00 taken out when the loan was originally obtained back in 2006. I been in touch with Wells Fargo who is the Mortgagee for both first and HELOC. Here are the options they have put on the table thus far. Due t Hawaii being a non-recourse state they indicated that they are declining my short sale request, and leaving me no option but to foreclosure. Can you shed some light on my concerns, as my anxiety may put me in the nut house before all is resolved?

1. If I find a Buyer at $590,000.00 and loan is for $589.000.00 then I assume the first should pretty much betaken care of.

2.In terms of the HELOC, from everything I'm reading the bank can come after me to repay the $1490,000.00? Correct? Is there a loop hold around this? Why is the bank being so ridged about negotiating the $149,000.00.They offered me a term of 10 years no interest for the hold balance of $149,000.00, $1,241.00 per month. Which is unreasonable for someone who is applying for a short sale, as the reason why we are applying for a short sale is due to financial hardship.

3. I assume I'm insolvent on the first mortgage, but not the HELOC potion of $149,000.00. Correct? Will I have to pay taxes on the whole $149,000.00?

4. Do you think it would be possible for me to negotiate some terms to the $149,000.00?

5. If I decide to hand the property over to the bank what sort of penalties will this have on my credit? Is a short sale more beneficial to your credit that a foreclosure?

Mahalo, (Thanks)

Joshua H @ 10:22 am:

Hey Richard, I live in Columbus, Georgia and my rental property is being foreclosed on. The mortgage company is Homecoming Financials. We have worked out a repayment plan, but the problem is we still can't afford the repayment plan. So my question is would homecoming accept a deed in lieu of foreclosure. I don't have a 2nd or 3rd just the first mortgage. The house is a sucky area and needs repairs. Worst case here in Columbus, Georgia if the house goes into foreclosure what is the likelyhood they will come after me? if they did how would they come after me. Would they take my personal house. I have real estate but all of them are controlled and not owned by sandwich leases. No real equity in any of them. If the house did sell down the road through reo or investor would they just tax me on the difference or would i have to pay it back and be taxed on the amount. I keep hearing people say in georgia they usually just foreclose and leave you alone, but i dont know how true this is. Any help or insight you could provide would be great. My main concern is what exactly can they do to me if the house is foreclosure and what is the likely hood they would come after me. Do you believe they would accept the deed in lieu? Any insights or help would be amazing. I loved the free video btw. Josh H

I don't know if they would come after you. And lenders hate DIL. They will do it if they have to but I'm not sure they would do it much in Georgia. Why not just do a short sale? There is some price that the house can be sold at. Then you can go back to the lender and get them to approve it and you are far better off. And so are they. They don't want the house back, do they?

Even if the house is in poor condition and the area isn't good, there is usually, almost always, some price that the house will sell for. This gets it off your hands and off the lender's hands. It is probably the best course.




Raymond @ 1:36 am:

Hey Richard, Can a short sale be done to a family member. For example can I short sell my house to my son or brother who doesn't reside with me. And my second question was that is VA. a non recourse state. others sites state that it is a recourse state.. Regards, Raymond

Hi Raymond. A short sale with a family member is not acceptable to the lender. They only like short sales because you can get more for the house than they can if they were to foreclose, get it back, fix it up and market it. But if you are selling to a family member, why would you want to get as high a price as possible? You wouldn't. You would want to get the lowest price possible and that is exactly contrary to the lender's financial interests.

Virginia is a recourse state. You are better off doing a short sale and negotiating with the lender. Where are you in Virginia? Drop me an email at if you are in the Fairfax, VA area.



karey @ 6:36 pm:

We have two condo's in Hawaii that are investment properties. Now that flights are so high, we aren't able to rent for the same amount as the long term tenants paid that just moved out of both. There are 260 condo's on the market. We would be upside down 1300 a month when rented. We've had them on the market since last November with no bites. We stopped paying on them three months ago. Also, we have a rental home in Reno,no equity, that had an eviction last month and was vandalized. We did all we could to clean it up but it's still thousands in repair costs so it's now vacant. We have no seconds on any of them. We have our own home, no equity and have taken in a tenant to help with the mortgage. We have a rental house in Redding we are upside down on about 300 a month, no or little equity. We have a lake lot that we pay 330/mo on but the note expired July of 2006. We have 20k in the bank, no credit cards, no loans, no other bills at all. What's best for us; short sale, deed in lieu, bankruptcy, walkaway? Two attorneys I've talked to do not know of the walk away theory or insolvency. I am going to a third attorney while still struggling for a short sale with the bank on the two condo's with no resolution. What do we do? By the way, we barely make ends meet on our own personal expenses which are at the lowest they can go. We have always relied on the sale of a property to put money in the bank to cover our upside down rental expenses. HELP!

Wowzers. Thanks for posting. I can't give advice in specific situations. But if I were in this position, I would do short sales. If you can't pay any of the payments, then don't. Work on short sales and you can do this yourself. You don't need an attorney. I would always consult a bankruptcy attorney in a situation as you describe. Short sale is best if it can be done and it isn't that difficult. Just takes knowledge and perseverance. Get my Mortgage Relief Formula course while it's still very cheap,  and you will be able to do your own short sales work and if you hire someone you'll know what they are doing or should be doing.

Believe it or not, this is a great time to make money in real estate. You can solve your problems yourself, and then make money helping others do what you have done.



Rahiel @ 11:07 pm:


How are you? We have a property that was bought as an investment property in WA state. The foreclosure date has been set for DEC. 4. We have an offer on the property for $170K less than what it was bought for one year ago. I'm concerned that a deficiency judgement would add that $170 to our personal liabilities. Do I need to be worried or no, under what RCW do they have legal recourse, or do I? Since it is an investment property do they have the ability to come after our personal residence? Thanks ahead of time for your help…: )

Matt @ 7:09 pm:

This is indeed a great site.

I have a question I assume applies to many people. I have an invesemtment property in NC that is tanking. I live in DC. I believe any foreclosure or defincieny judgement is dictated by the rules where the property is (NC). How does the fact that I live in DC impact how this could play out?

karey @ 7:31 am:

Our primary residence is in California. We have two rentals in Hawaii and one in Nevada we stopped paying on and they are not rented. I talked to a CPA attorney yesterday and he said go for a deed in lieu or bankruptcy but not a short sale. I've tried for a short sale for months with no results. He said that all three would have to go for a deed in lieu or nothing, if not go for a bankruptcy. I think that's where we're heading. Do you know if Hawaii is a recourse state or not, judiciary or non judiciary, deficiency state or not? Same for Nevada? What about our one action option? Also, does it change things if they are rentals? We are getting so many different answers. I emailed you before and really appreciate your help.

Jay @ 10:05 pm:

Hello. Do you know what is the percentage of nonrecourse mortgage debt in the total outstanding mortgage debt nationwide? Any estimate, educated guess? I can't find any statistics on this. Thanks!

I don't know the answer to this.



Bruce @ 12:02 pm:

I purchased a townhouse in Woodbridge, VA in 12/2005 for $396K. I had to relocate to the west earlier this year for work and was not able to sell the townhouse for a listed price of $328K. I have the townhouse rented but have a negative $1,200 monthly cashflow. I would like to buy a primary residence where I live now but I can't sell the house for what I owe on it.

Is Virginia a non-recourse state and what would be the ramifications if I allowed the home to go into foreclosure?

IN BPO's do banks look at some broker's real estate companies as more credible, and what about real estate appraisers?

Robert @ 6:22 pm:

I'm not quite clear on what happens in Virginia. If you do a short sale, does that mean the lender cannot come after you for the deficiency? I think my loan is a deed of trust. If there is a judicial foreclosure, can the lender come after you when you have a deed of trust?

GLORIA @ 9:15 pm:

I have read that if both your 1st and 2nd loans are with the same lender,
when they foreclose on the 1st, since they also own the 2nd it changes
their ability to sue for it. Are you familiar with this?

Also, please explain what is meant by non-recourse for purchase money in
the 580b rule since it dosen't mean what most people seem to think it means?

franci j @ 3:51 pm:


i am interested inyour mortgage relief package. i would like to learn how i can reduce my credit card debt and do a short sale if it comes to it. i live in california. i want to do a loan mod on first and second loans. that is not going well. first loan has told me i could be considered for a short sale. my question is: before the whole short sale process, or foreclosure if it came to that, begins, and i am eligible for another loan, and purchase another home, can the second or first lenders come after me. i understand that the second will most likely will, but i am not an investor and the new home will probably have negative equity right off the bat anyway. i plan on using a co-borrower and he wants to be certain that they will not come after him also. he has his own home and other properties. but they are not worth much. he lives in the mojave desert area and properties are not worth much there. thanks.

Lusana @ 9:29 pm:

Dear Richard,

I have a condo in Las Vegas that I got on stated income, without verifying tax returns, and i am an artist and cannot afford when the arm comes due next year. i don't know what to do! i don't want to lose my home, i have made all the payments on time, i am 61 years old and i wanted to know if I should be joining a CLASS ACTION LAWSUIT AGAINST COUNTRYWIDE who made me this loan and made me pay down the interest with my savings so that i could keep payment under $700 a month which have gone up now thru the HOA…..
and the H.O.P.E. program….should I be doing that?

Steve @ 7:25 pm:

Hi Richard,

I live in Las Vegas. I'm planning to stop making payments on my 4 rentals, (1 in California & 3 in Vegas). I don't want all the stress of doing short sales. I'm planning to call the banks once I'm late, & ask to do a deed in lieu of foreclosure. So, if they agree to the deed in lieu, will that be considered a release from recourse?
Also, I've invested in oil & gas joint ventures, mineral rights, royalties and I have a large brokerage account. They don't show on my credit report, which shows me as having a huge debt to credit cards & a HELOC which is not even secured by a house,(once the house sold, B of A didn't close it & said I could use it). So, is there any way they'll know about these assets?
And as far as the deficiencey judgement goes, in case they don't accept my request for a deed in lieu, after 6 month following the foreclosure sale, & they don't apply for the deficiency judgement, is that it? Will I be off the hook forever?


John Cariati @ 12:41 am:

Hi Richard, I have a quick question regarding non recourse states and rental property. If the property is in a non recourse state, and the buyer/owner defaults on a first (there is no second), and the buyer/owner has substantial other holdings, can the lender choose to pursue the buyer/owner with a deficiency judgment for his other holdings ? Thanks for your help on this.

No, they cannot.

However, take California as an example. A lender theoretically can foreclose through the court system, rather than the private non-judicial foreclosure method. If they foreclose through the courts, they could get a deficiency judgment. I do not know of any lender doing this due to the redemption period, expense, etc.



Lon @ 1:12 pm:

I live in Ca. and the value dropped to 100k below the loan amount. I doubt the lender will do a short sale so if I walk away can they come after me for the difference? I did re-fi over a year ago and did cash out to pay off a few things.

Jim Campbell @ 3:33 pm:


You're just a good person who wants to help people. Thank you so much!

Doug @ 6:57 pm:

I bought my home in Colorado in Sept. of 2006 for $185,000 with nothing down. I refinanced in Sept. of 2008 and took out $5000 in cash. My new loan balance is $195,000. There is no second mortgage. Countrywide bought my loan in October. I have not yet made my January payment as my income is dropping significantly next month. I have been approved for an apartment and I intend to move in to that apartment in March.

If I understand you correctly, Colorado is a non-recourse state, and a lender like Countrywide will not go after you for a deficiency judgement unless you have significant other assets? Is this true? Because when I asked a real estate attorney about this today he said it is not true, that they could go after me and garnish my wages (limited through they are).

I do intend to go for a deed in lieu and a short sale, but I do need to know if Countrywide can go after me for the deficiency if these strategies fail.

Thanks in advance.

mike @ 8:59 am:

Hi I am a little confused on whether the Rhode Island is a "walkaway" state. I do have assets (another house) but may need to walk away from the other..
Can they, or will they , go for a deficiency judgement?

Could you clarify ? thanks

Lokelani @ 6:46 pm:

Like so many, I can't sell my house. If I rent it, the rent will only cover about 2/3rds of the payment, and I will also have high maintenance and property insurance & taxes to pay as well. I'm in my late 50's, so-so health, unemployed. It looks like a job is on the horizon, but at 1/3 of my previous pay. I live in Hawaii, which has a very high cost of living. COL is certain to skyrocket further in the coming months. I don't have a lot of assets, especially since I've been unemployed for several months. I'm wondering if there is a state where I can safely buy a cheap little house or apartment with the last of my savings and not have it seized later due to a deficiency judgment from Hawaii? Please don't lecture me on any morality issues. I simply can't pay the mortgage for much longer and am very worried about being old and poor and homeless in the US. If there is a state that will not enforce another state's mortgage deficiency judgment (especially on a personal residence), I might at least have a place to live out my life and be able to survive on low income. Thanks in advance for any help you can provide.

Thank you for your question.

I wonder if your fear is misplaced.

I'm not sure banks have an appetite for coming after people for deficiency judgments, if folks are without assets. Seems like you should be able to do a short sale. Then you are in a position to negotiate a small or even negligible amount you would be paying over time, even 5 or 10 years. And you could move on with your life without fear of being served with a complaint and having a law suit to worry about.

I would strongly encourage you to do a short sale.



Sharon @ 1:17 pm:

Hello, I have a second home in Las Vegas (I live in the state of Washington and have a home with little equity.) I can no longer afford the payments on my las vegas home.

I have tried to do a loan modification (it is an interest only loan and their modification was simply pay up all fees and fines and they would extend the "life" of the loan which is essential the life of eternity).

Then I tried to do a short sale and was denied (I have no equity in the Las Vegas house.) Then I tried to do a DIL but about a month into the process, they proceeded with forclosure on the home. The home is to be sold in six days, on 2-9-09.

My loan is actually two loans, the second rider has agreed to accept a small payment of $6,000 and allow me to walk away from it, however the primary loan is for just over $300,000, not nearly what the home is currently worth or will likely sell for.

My question is, what is the liklihood that the lender (Aurora) will come after me for a deficiency judgement. I understand that they have 6 months to do so? If they do, can I negotiate it down somewhat? If I pay a deficiency judgement, wil I in fact become now a partial owner of the original value of the loan? (In other words, kinda like a post-dated equity sort of situation?) Thank you, I find your blog very enlightening and helpful,

Sincerely Sharon

Katie @ 4:28 pm:

Thanks for the great info! I live in Las Vegas and have 2 houses. The first is the home where I used to live, upgraded to a home with the idea to sell after we moved out… unfotrunately, the market took a tumble as we packed boxes! Now we have 1 mortgage on a small home that we are renting (taking a $400 loss each month) and a first mortgage and HELOC on the larger home. We are upside down by about 50% on both houses. We are worried that even if we can short sale one of the homes, we are left with a house that we are upside down on and looking at bankruptcy anyway! Do you recommend for people to try to short sale two houses at once?
Thanks again.

Jim Campbell @ 9:04 pm:

Mr. Geller has been very gracious to respond to the many posts that he has. I found one other very active blog which will be of immense value to many who post on this forum:

George Kimber @ 10:56 pm:

I have two rental properties–one in Michigan and the other in Mississippi.
Two questions:
1. There is a first and second on the Mississippi property. Just want to verify that because MS is a Non-Recourse state they can't get a deficiency judgement on the first, but could get a def. judgement on the second? (Both are held by the same lender)

2. There is only a first on the Michigan property. I do have other assests. Will they obtain a deficiency judgement?

Tim @ 8:58 pm:

I have a rental property in Hawaii (purchased 2006) that is upside down by $150-180k and am close to not being able to keep afloat. I am not yet deliquent on a payment. I live in TX now and have my primary home here. I have no assets other than my car, primary residence (protected by TX homestead law) and my 401k and IRA. If I walk away from the Hawaii property, what are my liabilities? I believe that Hawaii is a non-recourse state, and I have no assets that they can come after (I'm assuming that an IRA or 401k is protected.) Also, what are my tax liabilities if I allow foreclosure? Lastly, is there an "average" hit that one's credit score takes? I have a credit score of 800 and am wondering if it is going to get damaged as badly as it would in Chapter 7? Thank you for the help, it is most appreciated. Tim

Why not do a short sale? You will come out a lot better credit wise. It isn't that hard to do if you find some good competent help. That's what I would suggest you do instead of walking away.



Leilah @ 11:52 am:

Hi, My husband and I purchased our [California] home at the peak of the market in 2006. This is the only piece of property we own and it's our primary residence. We are under water by 375k. We put 10% down and have a first and a second mortgage. The second is a 30/15 loan 30 year fixed. We have not refinanced and can't because we owe more than the house is worth. The bank denied our loan modification request. I am no longer bringing in any income and we are taking a hit every month. If we were to walk, would we be liable for the second mortgage? Could the bank come after us for the second? Thank you very much.

You would be liable most likely for the second. You can negotiate with them and come out pretty good. A short sale is far better than a foreclosure. I would encourage you to try a loan mod again. Did they tell you why they turned it down? I would say it is normal to get turned down but persistence really counts.



Huntting @ 2:44 pm:

Richard Thanks for the information. I'm about to lose my job. I can stay afloat a few months before I'm in trouble. I'm making a move to the other side of the country (currently in Atlanta, GA moving to CA). I pay about 2100/mo and I expect I could rent for about 1500/mo. I'd be happy to not foreclose and rent the property if I could lower the difference to about 200/mo and then sell the property when the market improves. My question is this. What recourse does the bank have if I foreclose? I expect that if I did a quick sale, I'd have to sell for about 30k less than i owe and if the bank forecloses that they'd get about the same level. I've read that a quick sale hurts your credit just as much as a foreclosure does. If that's the case, what motivation is there for me to bother with trying to unload the property? I'm fully underwater either way, and if they can't sue me for the difference…is there something that I'm missing?

Short sales are way better than foreclosure. You void having a foreclosure on your record. You can negotiate how the credit is reported. You can eliminate a deficiency or make it much smaller. It is far better to do a short sale. In some states the lenders don't have recourse when in first position, but even there a short sale is kinder on your credit.



Leilah @ 3:55 pm:

Hi Richard,

Thanks so much for your response. I greatly appreciate it. The only reason the bank gave us for denying our loan modification request was that the investor was not interested. They sent a letter stating that our options were a short sale or foreclosure.

I am still a little confused about the second mortgage. Since it is not a HELOC and it was used to purchase the home, I am trying to understand why we would be liable for it if we ended up in a foreclosure situation. If you would happen to have further information to help clarify, that would be wonderful.

Thanks again!!

Huntting @ 6:31 pm:

Richard. Thanks for the reply. One follow up. Can you confirm that if it is a non-judgment/recourse state that they can not seek in court a deficiency against me?

Thanks once again

ray @ 9:02 pm:

Your web site is very informative. Everyone has problems and needs your opinion, eh? I live in Michigan, my loan is serviced by American Home Mortgage Services (AHMS). trying short sale. not much luck getting through to lender to cooperate. will keep trying meanwhile looks like MI is a recourse state. Any way for me to limit my damages. I should add that this is the icing on the cake because a business associate stole $$$ from my company and bankrupted me 5 years ago. I am four years discharged from bankruptcy. I really dont want to go through that again. any other solutions. I will gladly buy program if there is a chance to try some other strategies to cut liability to lender. thanks so much

If you really work at getting the lender to see things the right way, you can often get the short sale approved. I would not give up on this. Most people who do short sales get a "no" at first, primarily because the lender feels the offer is too low. Actually, the "lender" is a servicer and that means, they have to go to someone else, typically the investor who holds the note, and get them to give your deal the nod. This is where things fall through the cracks. And where persistence really pays.



Jerry @ 5:52 pm:

I purchsed a motor home in Arizona. The lender is in California. I am an Idaho Resident. If in the future I am unable to make the payments on this unit is it possible for me to return it to the lender and not be liable for any deficiency.

moly @ 12:27 pm:

hi i refinanced my house last year but didnt get any money out of it. i live in California. is my loan recourse or non recourse?

If there is one loan, a note secured by a first deed of trust, and if it is lost in foreclosure, there is generally no liability in California, so no recourse. There are a few complications but in general this is true.



Douglas Feldt @ 6:27 pm:

So, in Nevada, If I declare bankruptcy and walk away from my home, as a recourse state, the mortgage company will come after me for the difference?

Not necessarily. If your bankruptcy covers any judgment, or is done after the foreclosure is complete, then it should cover any residual liability. I am not a lawyer and you really should spend an hour paying a good bankruptcy lawyer to look at your situation and give you a professional opinion. It is money well spent. I like to find a lawyer who does almost 100% chapter 7s simply by calling around and asking. I prefer chapter 7 because it succeeds much more often than 13s which mostly fail and leave an even worse mess behind in many cases.



Kerry @ 12:29 am:

Terrific site that gives so many of us hope! Thank you for sharing your knowledge. I purchased our CA home a month before marriage. I am the only one on the note and deed. The note was a stated income 5/1 ARM. Recipe for disaster when the economy tanked, income disappeared, and house value plummeted to $150K less than owed. I'm hearing that mods forgiving this much are nonexistent (it's more like $10-15K max if they even consider it). If so, short sale seems to be the best option. Questions that haunt: 1) can/would the bank come after assets that are solely in my husband's name even though he isn't on any of the loan paperwork? 2) Does the stated income aspect play into the lender's decision to come after me for a deficiency? I feel I'm the only one going into a short sale with a stated income loan but, in reality, they're probably pretty common. Seen outcomes to situations similar to this? Thank you!

M. Thompson @ 2:04 pm:

I live in California and currently I am in the process of giving back the bank a Deed-in-Lieu of forclosure for land (dirt) that I purchased in Nevada. The bank has agreed to this. However, has advised me that based on the recent appraised value of this land, and the difference of what is owed on the property, that they will be sending me a 1099C for taxes purposes.

Since Nevada State is a recourse State, and the bank is issuing me a 1099C (tax wise, I'm taking a huge hit with that alone), could they ALSO come after my California assets?

Bottom line, can they do both, or just one or the other?

Thank you!

ray @ 7:50 pm:

I bought a mobile home (in a park) in California 3 years ago and currently owe 61K, but it is now worth about $30K (maybe even less). About a month ago I found out that my company will most likely not survive our current economy and I will most likely lose my job within 1-3 months. In an effort to make sure that my family still has a roof over their heads and something to eat, I went ahead and decided to purchase another home for $60K. I now plan on just walking away from my first home which I've lived in for the past 3 years. Other than the new home which will complete escrow within 2 weeks, I really don't have any other assets. I never refinanced or took out any other money on the first home - do you think they will come after me due to the second home? What are my options?

You help is greatly appreciated!

James @ 10:28 am:

Just a quick THANKS for this presentation. Good information. — James

jacque @ 12:40 pm:

Hi - I've read this whole column of questions and answers and learned a lot. Thank you. However, I have a condo in Phoenix that I'm unside down on. Since buying it, I have moved into another state and purchased another home. If I walk away, can they come after my equity in another home — there is very little. Actually, if my PHoenix place is rented, I can afford to cover the $500 difference between rent and my expenses but don't wish to keep throwing money away. What are your suggestions.

You might consider a short sale. That would get you out of it. Alternatively, a loan modification might be possible. Have you discussed that with your lender?



Raj @ 10:07 pm:

Thank you for your excellent presentation. I am sure it helps many folks like us. I refinanced and took cash out of my primary home in California and used the proceeds to buy another home due to a job change and relocation within the state. I was hoping that I will be able to sell my previous home in 6-9 months. We could not sell it for 18 months and now ended up renting it. The rent only covers 50% of my expenses. We have only one loan (1st mortgage) on that home. But it was a cash-out refinance. The difference between its loan balance (400K) and its current market price (325-350K) is about 50-75K. We have two other rental properties without any mortgages and some other investment assets in mutual funds. In California if we were to short sale that home can the lender come after our other liquid and non-liquid assets? One factor in our favor is that we only have one loan and the difference of 50-75K is not so huge for the lender. We will appreciate your help. Thank you very much.

In California, if you let a first loan foreclose, they
use a non-judicial process, a trustee sale, to foreclose.

And they cannot go after your other assets in this case.

Even if it's a cash-out refi.

So the safest thing is to let the lender foreclose on the
property and then they cannot go after your other

But this isn't the best thing for your FICO score.

So you may want to negotiate with the lender on a short

Since you have a strong bargaining position, you may be
able to get a short sale done without getting into your
personal assets and liabilities.

Still, if you have a high net worth, it may not be a smart
idea to do a short sale on a property with one loan.

Theoretically, the lender could pursue judicial foreclosure
and then get a judgment against you. I have not seen
lenders doing this, but they could do it.

Now, let's say you have two loans on the property and
not just one. Different story because now the second
lender can go after you in court in most cases, assuming
they have no equity.

They can pursue you on a breach of contract claim just
like an unpaid credit card could.

Fortunately, with one loan, it's a lot simpler.



–Richard (keep in mind I am not an attorney,
and may be wrong. You have to do your own due
diligence please.)

Casey @ 10:22 pm:

Hi Richard, I bought a condo in California several years ago using 2 loans to pay for it. A couple years ago I was able to refinance 2 loans into just 1 loan (based on high appraisal value when the market was peaking) It has been our primary residence for over 5 years. Our financial situation has improved recently, and we just bought a house down the street using an FHA loan. We were able to qualify for this loan even with the current loan, though realistically, they don't take it account all of our other expenses (bills, childcare, etc.) and we'd be very hard pressed to make both payments. The original plan was to rent, but seeing that the rental market out here isn't too hot and rent wouldn't cover HOA, property tax, etc. we'd like to understand if short sale of the condo is even an option. Will the lender for our condo even entertain a short sale once they see that we recently purchased a home? Can we expect that they would want to drain our savings - can they do this since we have a refinanced loan? Will they be able to sue us or come after our assets? Thanks Richard Casey

Short sale is an awesome option, Casey. In California they just about always pursue trustee sale foreclosure, which does NOT allow them to pursue you, at least as far as the first loan goes. The second can pursue you. A short sale lets you negotiate with the first and second and come out pretty good. Fact you bought another house, well, so what. They just want to cut their damages down as much as possible, and so do you, so you should be able to reach agreement. Try my Mortgage Relief Formula course which teaches short sales and all this stuff if you feel it would serve you.

Good luck, I think you'll be fine, but don't just ignore this or try to walk away. The second can come after you.



David @ 12:01 am:

If I live (primary residence) in a non-recourse state (VA), but my second home and my mortgage is in a recourse state (PA), can they come after me for deficiencies?

michael hogen @ 3:02 am:

Hey Richard. I have three houses, 2 in Orlando that are a little upside down, and one in las Vegas that is 60,000 upside down. I would like to walk away from my Vegas home. I make 63,000 on paper and work for the Department of Defense overseas in Japan. I am able to lose the 30,000 a year on this home, but simply do not want to. What is my best move? I get free rent among other benefits working for the government overseas. Can they see the benefits that I receive by researching or is this impossible for them?

Mike @ 9:44 pm:

Richard , I apologies for posting on your site, if you would like to delete this, feel free, and you can answer it yourself, but I thought he should know this, as I negotiate many short sales here in FL and have come across this.

Michael Hogan,
I just want to mention this to you, since you said you worked for the department of defense. If you have a security clearance, you MAY lose it if you have a foreclosure on your record, thereby losing your job. Think carefully before walking away, you would be better of short selling the home(s). Good Luck

jason allrich @ 6:59 am:

is massachusetts a non recourse state? how do I tell if my mortgage is non recourse ? can you really get sued for mortgage fraud if you buy a new home and the renters of the first back out of the agreement ?

daz @ 8:47 pm:

is texas non-recourse state? I am confused with the list above.

Billie @ 2:59 pm:

we are 69 years old, he just lost his job, so we have no way to pay mortgage, we have social socierty which pays other bills, we have moved out of house, and are behind on 6 months, they raised our payment by adding 12.00 for starting over with putting late payments on arrears, It is a FHA loan, so what happens to us now, we can't afford any of it, will we be charged with what the house is short on sale, we tried to sale it , not one taker, It is a 4000 sq ft house and part mobile home and add ons, hard to sell, what do we do now I have told them we will sign deed over to them, they won't answer that, what do we do now. where do we stand, since this is a recourse state, no second, help please

Patrick Nguyen @ 11:33 pm:

Hey Rich,

Based on what I'm reading, it sounds like in CA it's a non-recourse state, as long as the loan is considered a "purchased money" transaction. What if I initially bought the property as my princial residence, but later down the road I decided to make the property a rental property. Will this still be considered a non-recourse purchased money loan?


lance @ 1:42 pm:

i just forclosed in arizona. with a 80/20 loan the 20% loan was for 40k we took out 30k in equity on it. so now its 70k and the bank called me saying im still responsible for that portion is that true???

Barb @ 2:13 pm:

My son foreclosed on a house in 2007 and though everything was fine until yesterday. He got a letter from a lawyer requesting payment on the 2nd mortgage of $30,000. He doesn't have any money for paying this. He is in KY. Can they do this? What is the course of action he should take?

Barb @ 3:51 pm:

The same thing just happened to my son's foreclosed home from 2007 see next post. What have you done about your situation? We need help….big time!!

John Cariati @ 1:42 pm:

Hi Richard:

Do you have any info on Arizona foreclosures and deficiency judgments. I have a friend who is about ready to lose her rental and wants to know if B of A might prusue her in a judical forclousre on a deficiency judgment,

Thanks greatly for any help you can provide.

Patricia @ 1:56 pm:

Hi Richard,

I have a friend that bought a house for $220,000 and refinance and cashed out. His loan now is $420,000.

My question is if my friend does a short sale, is he going to have to pay any taxes to the IRS.

My understanding is that if you own a personal residence, you are allowed to make up to $250,000 profit without having to pay a capital gain tax (provided you live in the home for more than two years). In this instance, my friend lived in the home for more than two years.

Would you happen to know if this law applies in this instance or will he have to pay capital gains tax on the cash out ?

Roert Latta @ 2:28 pm:

I recently had an investment property in Tenn foreclosed on and sold, I have been contacted by a firm representing the Mortgage insurer [down payment was 10% so insurance required] and they are requesting a payment of the difference in sale price and balance owed. Since Tennesse is a non recorse state is this possible or are they just trying to recover their losses?

Romelle @ 12:06 pm:

Thanks for all the great inputs! my second home in Nevada was foreclosed thru Trustee Sale, despite several attempts to modify, US Bank said they don't have programs for investment properties, agreed with the short sale but buyer backed out the last minute, presented another cash offer the next day, bank turned down, said they don't have enough time to review.The bank now is REO. can they still come after us with the difference? no 2nd mortgage ..Thanks again!

Tina @ 11:52 am:

I understand In California they just about always pursue trustee sale foreclosure, which does NOT allow them to pursue you, at least as far as the first loan goes. Can the second pursue you even if it is from the same bank?

Yes, they can.



jeelz @ 11:08 pm:

Hi Richard, Can you pls give me your opinion on this. I live in CA. We're trying to do a short sale My 1st mortgage agreed with the shortsale but 2nd mortgage is asking us to pay half of what we owe (we owe $150K) and pay it in 80 months. We dont have any money at all to pay and we dont have assets. What's our options? we dont have any money to pay it. My husband doesn't a job. Pls advise. pls pls.. thanks

There is no way they can collect if you don't have it. 80 months and $75K is a lot. This can be settled potentially for much less. Otherwise they face recovering little or nothing in bankruptcy. You could engage a bankruptcy attorney and have her write a letter to the second. Hang in there. Time is on your side. The longer things go on, the less they will expect.



Tina @ 12:39 pm:

Hi Richard…Is this true and if it is…how do I know if my 2nd is a non-recourse loan, it is a 15 year conventional fixed balloon both the 1st and 2nd are with GMAC.


California homeowners have been making the refinance mistake as long as the bubble has been going on. The big mistake homeowners make is turning a non-recourse second loan into a recourse loan by refinancing it.

A non-recourse loan is a loan that the bank can only look to their secured interest. In other words, they can only foreclose, they cannot get a deficiency judgment and chase you into bankruptcy collecting it.

THIS IS HUGE! You can walk away from a non-recourse loan.

So how is a second mortgage a non-recourse loan? Simple, it was a purchase money loan for your home. A purchase money loan is one where the money went from the lender, to escrow, and then to the seller or to pay purchase closing costs. In California purchase money loans made on your home (note: not second home or investment properties) are non-recourse.

It's simple as that.

The mistake comes when you refinance your second purchase money mortgage. Because it is no longer a purchase money loan a refinance transforms it into a recourse loan. That means the lender will chase you into bankruptcy collecting it. Or worse, they will sell it to a debt scrounger, the worst form of debt collector. Your life will be hell if it falls into their hands.

It used to be second mortgages were never purchase money. Enter the housing bubble and creative Wall Street financing. The result: the 80/20 loan. It was really a beautiful thing. Buy a house with no money down, get two loans, a cheap interest rate first covering 80% of your loan, and a high rate second mortgage covering the 20% you were supposed to put down to have some skin in the game. Wall Street sold the loans to different investors and bought insurance on the second to cover the higher risk of default.

But there was an unintended consequence Wall Street seems to have overlooked. The Purchase Money Rule made these loans non-recourse. This has come back to bite. It turns out ETRADE has a bunch of California Second Mortgages. Guess what? They are unsecured now because housing prices have fallen so much, and there is no recourse against the borrowers. They can just walk away-AND THEY ARE.

A couple of tips:

1. You can refinance your first mortgage or both mortgages into one mortgage and still be a non-recourse. This is because the One Action Rule prevents lenders from looking beyond the mortgage in a non-judicial foreclosure. Second mortgages do not benefit from this rule because they have not had their One Action.

2. If a seller took a second loan on your property, they cannot look beyond a foreclosure even on investment properties or second loans. This is the Vendor Rule.

3. Always keep economics in mind. It's better to let your home go and walk away without liability to the bank then to try to save your home with a refinance and become personally liable.


Romelle @ 10:23 am:

Hi Richard!
Your reply will be greatly appreciated….I live in Nevada, tried to modify my 2nd home thru Downey Savings then US Bank took over, said they don't have programs for investment properties, approved for the short sale, but the buyer backed out the last minute, we submitted another cash offer the next day but the bank declined, sold the property thru TRUSTEE SALE, now it's in REO. Can the bank still get us for the difference? we don't have 2nd mortgage, total loan= 330,000 dollars, property listed at $178,000… please advise…THANKS!

Ohay @ 11:04 am:

Hello Richard:

thank you for your very informative website.

i have some investment properties that i was forced to let go owing to the housing collapse (in different states such as Texas, Idaho and Lousiana).

The second lenders (GMAC, Etrade, OneWest, Indymac, SLC) didnt get any from the foreclosure proceedings and are torturing me with threats of legal action. i didnt refinance or take any HELOCs on any of these properties. The properties in Idao and Texas were non-judicially foreclosed and the ones in Lousiana were judicially foreclosed (with first lender getting a deficiency judgement).

In desperate hopes of avoiding a bankruptcy, i am actively trying to negotiate with the 2nd lenders to see if they can let me off the hook for a fraction of total money owed.

Do you think they can get deficiency judgement if i cant agree with their demands ? Or can i ignore them completely if i know that they don't have any recourse ?

appreciate your advise !

Dave B @ 5:18 pm:

Hi Richard:

I've got a rental house in Indio, CA that I'm having trouble maintaining. I have a first mortgage for $146K and a HELOC that I used to pull out $150K. It's worth about $125K. It's not rented, and after putting money in it to rent it I might get $1100/mo. My mortgage payments are $1500/mo.

I have other properties, but none with very much equity except for my primary residence. Other than that, not much to come after. No cash, other than retirement.

If I do a short sale, can the second mortgage company come after the equity in my primary residence by forcing a sale?

For tax purposes, is my primary residence included in determining if I'm solvent?

What do you recommend?


Dave B

Mike Robinson @ 3:50 pm:

Aloha Richard,

Good web site.

My girlfriend owns a nail salon in Hawaii and is self employed. She is Vietnamese and speaks so-so English. When she took out her loan the loan broker put down her business gross as her income. She has a first $450k and second $100k (100% financed) on a home that is currently worth about $400-$425 maybe. She got behind and has not made a payment in about 8 months or more.

Our conversations with the mortgage processor have been fruitless. She has filled out duplicate paperwork twice and they have asked for it again. Her lender and the loan processor are both subs of B of A.

She wants to negotiate a new loan in order to stay in the house and could pay about $2700 per month before Taxes & Ins. By my calculations that would be a price of about $450k at 6%. I think this would be win win, as the lender wouldn't have any foreclosure costs or real estate fees, but we can't get to anyone who has any authority. I think they just don't want to realize the loss on the second wipeout and any lost interest, etc.

I'm also concerned about her being liable for recourse if they don't agree amiably and that she could lose her nail salon although I think she has ammunition if it goes to court.

Mike R

marc @ 9:53 pm:

Hi Richard, I need some help please. I live in Nevada a recourse state. I owe 215,000 on my home. I don't have second or a HELOC. The current value is 135/150,000.(1) I called my lender and I don't qualify for the Obama plan. (2) My lender stated I could do a short sale but they told me they will issue a 1099C. (3) They also explained I could do a Deed -In Lieu. What are the pitfalls of these choices. I don't believe my lender will do anything or say anyhing that will be to my benefit. The mortgage is current but I want to leave the state or at least rent if I stay . (4) I could foreclose on purpose. Which one of these would release me from financial liability? I don't want to be sued

Megan @ 3:33 pm:

Hello Richard

Thank you for your wonderful video. It help explain a lot of things during this stressful process. In July I began missing my mortgage payments on my first and second mortgage and in August I listed my property for a short sale. I got an offer and as you advised I submitted a full package with a BPO. My second mortgage company is not willing to negotiate. My second loan is for $96k, and they want me to come up with $43k cash to settle. I have no money and cant come up with this. My first mortgage will only pay $3k towards the second mortgage. The 2nd mortgage company says if I do not come up with the money I can pay part of it right away and then take a note out for the entire deficiency. Is this allowed in CA? What is the best way for me to negotiate with the second lender for them to settle for .10 cents on the dollar and not more! I am afraid I am going to lose my buyer if my second mortgage doesn’t approve my short sale soon!

Thank you for your advice and help. it is greatly appreciated.

Pete @ 10:10 pm:

Thanks for the informative video, I learned a lot!

Rick @ 4:01 pm:

We live in DC and have been offered a work-out by a bank to essentially refinance our home (1st and 2nd mortgage) where the appraisal came in at $735K and the total loan amount is for roughly $712 (we bought it for $725). Because supposedly our original mortagee is needing cash, they are working with the bank to get this off their books. The offer given is to combine the two mortgages in a "refinance" with all the closing costs paid by the original mortgagee, while the original mortgagee is also forgiving $10K in principal. Our total mortgage payments would be reduced by roughly $650 a month, but we would also now be paying PMI which were weren't before. My question, however, would we go from a non-recourse to a recourse loan?



Vic @ 1:55 pm:

Hello Richard,

I live in GA where I have a primary home for which payments are current.

Now I have a 2nd home in Vegas. It was bought for 300K in 2005, current value is 115K. I have only one, original mortgage (No HELOC) with a balance of 225K. The house is sucking all my savings for years and can't take it anymore.

I would like to go for a foreclosure. What do you think the Lender will do? Any tax consequences?



Jan @ 3:29 pm:

Thank you for your wonderful video. I like to get clarification of this non-recourse state. We live in California. We bought 9 rental properties in Florida, Arizona, Colorada and NC at the peak time around 2006. Now almost every single one is a upside down property. I am doing the short sale to get rid of 4 properties in FL and AZ. How is California a non-recourse state apply to my situation that my properties on short sale in other states? Do you mean even we walk away or short sale the properties in those 4 states, the bank will not go after our paychecks for our debts because we live in a non-recourse state?

erin @ 8:08 am:

such a mess… my husband is military, in 07 owned a home in ca had to relocate to va. we got renters for home in ca. purchased home in va. things were fine. long story short renters didnt work out we had to let house in ca go into forclosure. problem now we paid too much for this house, we are sinking, cant refy w/ a forclosure on record much less the fact that the LTV to way off so the bank is not going to help.. and we do have a second mortgage. what is your suggestion? and im reading the internet constantly trying to learn va recourse vs non recourse law just in case…

Jackie @ 7:44 pm:

Hi Richard,

Need your wise insight on my current issue:
Primary residence in Nevada - a recourse state. Upside down $150K.
Short sale in process; lender is waiting for my final decision. Here is the situation:
1st mortgage accepted short sale with no money out of my pocket.
Heloc was purchase money taken out with 1st mortgage. Heloc is willing to accept 3K from the 1st, no money out of my pocket, but a deficiency judgement — through a collection process later.
My concern is the deficiency judgement, their attempt to come after me, and its affect on my credit. My only assets are some savings and a car, I am unemployed, so my assets pay for me to live until I gain employment again. I have minimal debt, and absolutely do not want to end up in bankruptcy.
What do you suggest?

Tom @ 3:59 pm:

I have two lot loans in West Virginia that are going to either end up in foreclosure or short sale. If West Virginia is a non-judegment state does this mean that my loans are non-recourse? And, if they are non-recourse will I have to pay income taxes on the "phantom income" from the cancellation of debt???And, lastly, if I do owe tax how do I figure the cost basis and tax implications? Thanks!!!

sara @ 6:29 pm:

We have one rental property and are way under water. We are planning a short sale. We have the original loan, which I understand would be a purchase money loan - but is this still true if it's a rental property? Thanks for any info.

Ardie @ 5:35 pm:

We moved to WV from out of state due to demand of an existing employer. Having paid-off (and lived) in our prior home more than twenty years, my husband placed all of our funds from its `05 sale into an existing home that now is well upside down. Compounding it all I recieved diagnosis soon after our move of a stage II lung cancer. Major surgery followed and complications due to unproven negligece occurred (among which was misdiagnosis of a non-existing cancer). I have been unable to return to employment both due to conditions with which I am left and a gaping sheer lack of opportunity within access. We therefore rely solely on one income and both nearing 60. Is retirement income (pension funds, SSI, 401K, etc.) in any way protected from from being attached following foreclosure? We possess no other assets.

Albert @ 4:24 pm:

I live in California and own a condo in Hawaii. If the bank forecloses on the Hawaii property can they pursue my California assets? Are my only options to pursue a deed in lieu or a short sale to protect my assets?

Stephen Benedict @ 2:57 pm:

None of the comments has come from New York State, apparently a non-recourse state. I am right at the point of deciding between short sale, if I get an offer (after nine months of listing and two price reductions) and walk-away. I am wondering if you have had some experience with New York situations that throws any light on how my state's judiciary tends to respond to the various alternatives. I have a second mortgage as well, am way underwater, and have no way of keeping current on payments for more than a few months. Would much appreciate any experience you've had. (The site is terrific, by the way, and very instructive to a novice like myself.)

Glen World @ 5:32 pm:

I don't think Missouri is non recourse. I could be wrong. I have read a lot of condictory information on the net.

[…] White also notes that the wisdom of a strategic default depends heavily on state laws. Some states have non-recourse laws that prevent banks from going after the personal assets of homeowners who default; others don't offer consumers this protection (Click here for more information on non-recourse states). […]

Mike @ 1:56 pm:

I guarenteed a commercial loan in Idaho but was not the borrower. The property is located in Idaho and the Bank is in Idaho. The primary borrower is unable to pay the required payments of the loan. If I decide to stop supporting the primary borrower and payment of the commerical property does the lender have recourse to take my personnal assests including (home, retirement, or other liquid assests?

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Michelle @ 8:06 am:

I had purchased a home with an 80/20 1st/2nd mortgage. I tried to negotiate with the 1st mortgage several times but no one would return my calls. I tried for over a year to do a short sale but it fell through when the home foreclosed/sold in 01/09. The problem is the 2nd mortgage, recently in pulling my credit report there is an outstanding balance due to them. I'm in Minnesota, what are the chances they will not pursue or will pursue?

Pam @ 7:07 pm:

I'm in Nevada. My SO recently had to short sell his home. He paid $278K and sold for $156K. The bank approved with no recourse, but at the 11th hour the PMI refused to accept unless he paid them $20K, which he does not have. They decided to lower the amount to $15K with no interest and are preparing an agreement as I write. My question is this: why do you even have to include the PMI in the negotiation since they don't hold the lien? As well as they are the benefitter of the years you paid to have them in place just in case this happened? Do you have any legal grounds to sue them if they cause the loss of your short sale, since of course that will result in them paying out even more loss funds?

Mark @ 10:08 am:

RIchard, I am hopeless in Michigan, stuck upside down, bought out the ex-wife in 2006 at peak appraisal time. My "equity" is gone. I need to find relief from this. What is my prognosis as I am too old to start over, and I am living in Michigan?

Tex @ 11:47 am:

I live in oregon and own 3 homes here. One has a private mortgage, and the other has a 1st and 2nd. My primary residence I am upside down with an interest only payments. Work is slow and income is down. My wife and I want to sell our house and get out of that obligation so that we can move into one of our more affordable homes. We will probably end up approx $30k short fall Can they attach any of the shortfall against one of my other homes? Will the fact that the loss will be minimal (11% estimated) make a short sale more easy to obtain from the bank?

Peggy @ 11:35 am:

Own home in Fl. - wifes primary residence, both names on deed.
Own home in MI - my primary residence (homesteaded) w/both names on deed; and have equity in this home.
Want to give deed in lieu of foreclosure on Fl. residence which is valued at $260,000/mortgage debt is $402,000.
Question - can they take Michigan home away if the Florida home is defaulted on? Both mortgages are w/Bank of America - not easy to deal with we've heard.

Tracy @ 1:00 am:

Can someone give me a definitive answer as to whether Utah is non-judicial or not? I'm getting a different story from different sources. I don't know whether to pay $10,000 to complete my short sale or just let the bank foreclose. Thanks.

Lee @ 2:39 pm:

I live in Michigan and in a Manufacture community.The property and Used homes were sold last year, and the lot rent jumped ,because no one is on a lease(all month to month). The new owner of the property also owns the financial company holding the loans . My loan is not bank owned. What would happen if I walked away?. Could he get a judgment against me, for the remainder owed??.

Steven @ 5:21 am:

I have my primary home in Hawaii and stopped my mortgage last february ('09) and received a foreclosure notice from Litton Loan Services attorney in June of 09 saying they would start foreclosure proceedings in 30 days. I faxed the attorney a letter telling them to produce the note on the property that says they have any right to my home, and they haven't contacted me since. What legal right does the servicer have on the home if they cannot produce the note? How much of a chance would I have to have the home retitled in MY name in they cannot produce the original note? Thanks.


Pete @ 3:18 pm:

Hello, my parents are both in there 80's they own a home in a suburb of detroit and a condo in florida which they have made there permanant address. They borrowed $140,000 on there detroit suburb home years ago to help pay there bills. Today there broke, only social security. They have been informed that there suburb home is worth less then $100,000. What is there liability if they give the suburb home back to the bank. Also with there florida home that they own free and clear.

Cathy @ 4:03 pm:

I own 2 homes in California and one in Nevada. I live in the home in Nevada and my husband and I seperated and he lives in one of the homes in California. The other home is a rental. I am behind on my payments on the house in Nevada and just received a notice from a foreclosure company. If I let the house go into foreclosure in Nevada and the mortgage company seeks a dificency judgement against me, are my other homes protected by California laws? Can they go after my California homes to recover the judgment? I have a mechanical lien on my rental home and my husband has the primary home in California homesteaded. Are these houses protected? What action can the lender take on me once I reside in California? Is my only option bankruptcy? By the way… I have had 3 short sale offers for this home and the lender denied all three. I owe $275,000, there is only one loan on the the home and is currently appraised at $155,000. I have had an offer of $145,000, $155,000, and $160,000. The lender just keeps denying the offers. I'm a mess!! Please help.

Thanks you, Cathy

Rod Pavilionis @ 4:06 pm:

My Home was in Illinois. I completed a short sale on 19 Dec 08. I was able to pay off the entire 1st. mortgage and 10% of the 2nd ( line of credit ) same bank Wa Mu. I did not sign any promise notes at the closing. I have been hounded by several collection agencies for the last year. Each time I sent them a copy of the hud, and infor that I did not sign any further notes at the closing. This last collection agency is a law firm, I had my attorney send them the HUD last time and he told them that no note was signed at closing and that we are both retired on pension, no other income. Should I seek Bankruptsey Ch:7 ? This is getting aggravating. Thank You

Don @ 5:31 pm:

Regarding the Nevada NRS 40.455 am I correct that the mortgage company has 6 months of transfer of title to file for a judgement? The statute specifies foreclosure, are short sales included?
Thank you for the excellent information, which is not readily available on the web.

Patricia Di @ 6:25 pm:

hello I didnt see Massachusetts on this list eitherway? Does this mean my 2nd lender is going to expect to be paid? We are in working with realtor and lawyer to get a short sale. we got a buyer on the first day, back in october, but havent been except as yet. my husband is a disabled gulf war vet and I have Multiple Sclerosis we are over 60 and have used up all our retirement we couldnt afford the house anylonger and we took a retirment apartment that is rent substidized we still heat and elect our house but if we didnt take the apartment we'd lose our place on list. We are almost at point where we cant heat the house any longer we dont want to wall away and let pipes burst I can only pray our lawyers are working daily for us we live on disibilities now husband had to retire last year because of war disibilities there is no money how do we get the lenders to listen it was so hard leaving our home after 14 years ;( its going on 4th month with trying to get approved for short sale

Doug @ 11:53 am:

So if I understand what you're saying. If we are forclosed on (Judicial Forclosure) in the state of Oregon they can come after us for the difference on the second and the first??

Mike Williams @ 7:29 pm:

I live in Illinois but had rental property in Missouri. Four years after foreclosure PMI is seeking a defiency. The letter comes from a third party law firm. Can he legally do this since the property was in a non-recourse state?

Dean @ 12:44 am:

Hello Richard,

We live in California. Originally, we had a 1st mortgage with WF Bank for $342,000 and a 2nd mortgage with them for $90,000. We refinanced the second when we had our pool built, so now it's with Guaranty Bank and the amount is $150,000. We have stopped making payments on both first and second mortgages. We're not sure whether or not it's better to go into foreclosure or do a short sale instead. My question is what are the tax implications if we foreclose or if we short sale? Also, if we foreclose or short sale will our first or second lenders come after us for a deficiency?

Renee @ 12:29 am:

Hi Richard,

Thank you so much for this video! One quick question, I have a first and a second with the same lender. I bought the house at 100% financing with both loans in 2006. I live in California, it is my primary residence. Both loans were used as the original purchase price for the house, and I was never able to refinance or modify the loans, because the house value dropped the minute I bought the house. I am now down by 45% of the original price of the house. I want to let it foreclose, can the lender come after me for the second even if it is the same lender that holds the first?

John @ 11:18 am:

Does it make any difference in WA state if the property owned is an investment property versus primary residence when it comes to the issue of recourse? Secondly, I pursued my investment property when I was single and am now married. If there is any recourse the lender cannot come after my wife's assets can they since she is not on the loan and we were not married at the time of purchase. Thanks for your advice.

Virginia @ 8:00 pm:

Hi…….I've got questions???? normally a non-recourse state. We tried our best to try and keep our home there, but B of A was not helpful at all.They basically told us that we did not qualify for any of their programs. Since we became unemployed and couldn't find anything out there in CA. , we left for Texas with our family. Our oldest daughter stayed in CA.with some of our extended family, but is still going back and forth to the house to care for it. It has been 6 months now and B of A has not bothered foreclosing or anything?

My question is this……….should we worry that Bank of America coming after our home in Texas (there is no mortgage on it)?? We had to make VERY difficult decisions as to what we needed to do in order for our family to survive.

Any advice would be appreciated. Thanks

Flavio @ 6:29 pm:

I have the same situation as Renee, I also purchased a home in Ca in 2005, I had a 1st and 2nd through Indi Mac. The house was foreclosed in 2008. If the 1st and 2nd is through the same bank, can the lender still persue the amount on the 2nd loan? Thank you for your time

Kevin @ 11:06 am:

Virginia shouldn't be on your list either…

Lenders may obtain deficiency judgments against borrowers without limit in the Commonwealth.

This information can be readily found in:

Code of Virginia, Chapter 55 (Property and Conveyances), Chapter 4, (Form and Effect of Deeds and Covenants; Liens) inclusive of §55-48 through §55-79.06

M. Therese Smith @ 4:07 pm:

I had a short sale on a investment 4plex which closed January 11th 2010 in Colorado Springs ( a legal state for collecting deficiency)…Carrington Mortgage Services the loan and collects for Deutsche Bank left their option open in the approval letter to come after me for the deficiency.. I have read up to 5 years …It seems I have no right to know what their intention is. No one will answer me… the phone number I was given on the approval letter had an associate that didn't even know what a 1099 was.

After several phone calls I fond that I needed to wait a month to find out. I called this week and talked to their “Recovery Services Department. I was informed that they didn’t have the file yet but there is a possibility and they have a legal right to negotiate this debt and the associate added that she has done this kind of collections as much as two years away from the actual short sale closing. That puts me past the date of tax being excused 2012. If there is no law in place that requires banks to inform then the Obama help is of will not help.

I am unemployed. I know I will eventually be employed. This ordeal and the laws ( if I’m informed correctly) means that once I’m on my feet they can come and knock me down and cover me in debt that will last the rest of my life. If I owe this debt then don’t they have an obligation to let me know and is there a time limit. Can they just come to me 5 years from now and ruin my life. Can anyone speak to what strategy I can use to find out what my next step should be? Do I have any avenue to find out or require an answer from the bank as to their intention?

The language on the short sale approval letter is:
• The mortgagor (s) is advised to discuss the ramifications or this transaction with an attorney and or Tax advisor.
• This transaction is not to be considered a resolution of the account, satisfaction of the debt or payment in full.

Thanks in advance for any wisdom you might bring to my dilemma
Regards M. Therese Smith

joe @ 4:25 pm:

Hi Richard,

Great website! I live in CA. Had a timeshare foreclose in Hawaii. Turned it back to the owners and got a 1099-C. My loan was purchase money. My understanding is that Hawaii is a non-recourse state?? If so, I believe I'm home free!!!!

Just confirming, is Hawaii a non-recourse state and am I on the right track???


Chris @ 12:21 pm:

I'm from Idaho, divorced in March 2009, we walked away because neither of us could afford it on our own. Tried short-sale, but Citibank dragged their feet, the short sale was a cluster. Not that we expected it to sell anyway, we were in the middle of a remodel so some walls have been left undone. Found the auction papers on the front door yesterday.

Can anyone give me an idea what Citibank will do after the auction if they don't get the mortgage cost?

Thanks in advance!

Uly @ 11:17 pm:

Hi There,
I purchased 'land' in North Carolina. Purchased for 250k, probably worth 80k. If I short saled the land, would they have recourse? I live in California.

Dave @ 2:13 pm:

Bought my in in metro detroit for $135,000 back in 2006. Now its worth about $75,000, if i just walk away can they get my saving account or any money in other accounts

Brian @ 8:34 am:


I have a rental home in Mississippi that has a $60K mortgage on it. It is now worth $10K and my property manager has told me it needs up to $5K in repairs to get it re-rented. I don't have the cash to get it up to snuff and have had it on the market for over 90 days with no interested buyers or offers…What can I do? I just want out of the property and have talked to the lender but the short sale needs a buyer and I have none… I can't afford the $500 a month mortgage and won't even be able to rent it for that if I could find a renter…
I'm very seriously thinking of walking away….

Anthony @ 6:07 pm:

I own a house in Idaho. This is the only home I own but I rent it out and I rent a house in Cal. The Idaho house is on title as a second home. I owe 225,000. Apraisal came in at 185,000. Banks wont work with me. What will happen if I just walk away?

Jeff @ 11:17 am:

We are in the process for a short sale in Northern CA. I have a recourse loan since i bought the house in may 2005 (480k 80/20) and refinanced it 18 months after and took 20k from it. Now the B of A approved the short sale but gave me 2 options.

1) no deficiency and pay 29k for 1st loan and 9k for 2nd loan.
2) 1st loan will have a deficiency notice and able to chase me if needed and 2nd loan forgiven by paying 9k.

I cant do both since I don’t have the money. My buyer is willing to pay the 2nd loan (of 9k) but im stuck on the first loan for a deficiency notice. I spoke to atty and told me that to try to negotiate further and I did, but the investor is only willing to go down to 20k for the 1st loan. I was also told by my atty that if I choose to do short sale and choose option 2, they might be able to chase me for a higher amount (even if I file for bankruptcy) (which is the 1st loan) and if I do foreclosure, they will only chase me for my second loan which is much lower. I am very confused on what to do, do you have any input? We are leaning towards foreclosure but not sure if this would be the best way.

jeff johnson @ 8:17 am:

I own a home in VA. Have a first at $550k and a second at $15k. Bank has been difficult and stubborn, but I am now under the "office of the President" - sounds nice but the are just servicng the loan.

I am unemployed and diagnoised with a brain infection.

If this goes to foreclosure, can they pursue assets such as a company retirement plan and my IRA plan? I do not have much else.

I have been in contact with a local attorney.

Timothy Morgan @ 2:17 pm:

I have a quick question for me. My ex-wife lost the Ohio home I left her in the divorce last year or so to foreclosure. Is she responsible to pay that debit if she comes into money from my retirement? If so, who can I contact?

Joy @ 1:13 am:


My dad died last may and he is the only name on the mortgage. No money in his estate and after a year we can no longer make the payments. There is a 1st and 2nd mortgage. Can they go after my mom for any deficiency? We live in Wv?

Rock @ 2:08 pm:

I have a property in Hawaii, purchase price was 217k, but now it's down to 165k-170k. it's first mortgage and I don't have any equity or other debts. I am also a foreign worker who has been working under work visa. The problem is that I am about to be layed off in 6 months and I need to go back to home country within 10 days after the layoff. that's what immigration law says. the remaining balance is 185k. Should I just let it foreclosed? I also have PMI paying about $65 per month. My evil thinking is just walk away and save money to be used when I go back, but I just feel not ok.

Please advise

Vick @ 9:52 am:

Is it easier for a bank to either come after you or to foreclose if you "refinanced" as opposed to just having left the original loan intact? I am facing a "refinance" decision on income property (not my primary residence) right now but don't want to do that IF I'm adding to my "risk" in later years. We're talking about a vanilla 30 year fixed fully amortized situation. If I end up going broke, will it have been better to not have refinanced?

Teresa @ 3:45 pm:

Hi there,

We are recently divorced last year, reside in WA and currently in short sale negotiations with our 1st Lender for a short sale since neither of us can afford to make the payments. I tried to modify it last year but the lender denied it. He's still residing in the house but we haven't made a payment since Sept 09.

My Ex-husband has received a summons for a judgement from our 2nd mortgage basically that they are suing him for the balance.
I'm not named on that document, but we are curious as to:

A) if the short sale goes through and the 2nd is paid $3k, can they still come after him (us) for the balance? He has a 2nd property that has $20k equity.

B) Why was HE only named on that document and not me?

C) What options do we have if the 1st just forecloses and the 2nd comes after us? FYI - I have ZERO assets.

Thanks for your help!

SW @ 11:20 am:

We currently live in AZ and are planning a move to TX. If we can qualify for and purchase a home in TX and then short sell our home in AZ (we are about 40K upside down, but have never missed a payment) can the lender on our AZ home come after our new residence in TX?


Mike @ 11:41 am:

How do you figure that Idaho is a non-recourse state? As far as I can tell by the statutes you most certainly can be sued for a deficiency by the lender after a trustee sale?? Please explain

REBECCA @ 2:24 pm:

Hi, I have a few questions, my mother has a home in California which we know is a non recourse state, she purchased a home in Nevada about 5 years ago, she's about to go into foreclosure in the Nevada home and is about to pay off her California home, she's got about 2 payments left, if she forecloses in Nevada can they come after her assets in California? Her wages? The california home has 4 owners does that matter?

thank you!

Bonnie Kent @ 12:46 am:

I bought a vacation home in Hawaii and it is now worth considerably less. It is for sale and not selling due to so many foreclosures in the area. If I walk away, can they come after my other assets?

They are not allowing a modification or short sale and refuse to work with me.
Sleepless in California

Financial Samurai @ 2:03 am:


So let's say I have $1million in cash, and I'm $500,000 under water in a vacation property in California, can they come after me since California is a non-course state?



vik @ 6:22 pm:


I am trying to do a short-sale on couple of my rental properties in CA. US bank is the lendor for one of the properties and they rejected my short-sale request citing "inconsistency at the loan origination". When I asked for explanation, they said "it was not owner occupied and thus it doesn't qualify, and the decision is final".

FWIW, I have some assets (brokerage account), but, significant reduction in monthly income making it cashflow negative when I add all expenses.

What should I do now? Thanks

Ivan @ 10:30 am:

I have a house in California with a partner for the last five years. I do not live in it and he is planning on moving out the next month. We have 217K on the first and about 66k on a second from the same bank. We are considering walking away due to disagreements and trust issues.

Question-Should I contact the bank and let them know we are walking? Secondly, being the 1st and 2nd are from the same bank, is there the possibility they will not pursue a Judgement on the second? Third-Should I retain and attorney and if so when


Paul Pirocanac @ 10:34 am:

Good Morning,

My sister in law in Michigan recently and unexpectedly lost her husband to a heart attack. She has some life insurance proceeds, but not enough to keep them in her current home beyond 2 years. I am trying to help her as she is a bit overwhelmed. I live in Wisconsin but did some internet research and found you. I am hoping we can get some straight answers/advise from you to make the best decision possible.

She is interested in selling the home, but owes more than she can sell it for. She owns no other homes. A year ago they declared bankruptcy. She is thinking of going into foreclosure. Is this the best option? Can the bank come after her for her other assets/life insurance proceeds?

Does the Federal program to help those in trouble with mortgages help her, and if so, how do we initiate that?

Any help/advise/direction or numbers of people to call would be greatly appreciated. It is more difficult for me to help her, as I am out of state.

Thank you very much!

Paul Pirocanac,

kate @ 11:53 pm:


i brought a house in CA for 400K and put in 20% down payment; therefore, my loan is $320K. two years later, i refinanced my house and took back my down payment, $80K. is my loan consider 'recourse'? if so, does the bank has the right to go after me even when that $80K is my original own down payment. I used this money to purchase my primary home and my partner remain in this house? Now both houses are in foreclosure. Please help.

june berg @ 11:14 am:

is Minnesota a non-recourse state?

Kathy @ 5:54 pm:

I had a home in Arizona that was a single-family home and my principal residence. I had a first and second mortgage on the home. The home foreclosed with the 1st mortgage lender. I moved out of the home before I was forced to move and left the state.

The 1st mortgage lender appears to have just written off the loan and I have had no word from them for 6 months. The 2nd mortgage lender has just sent me a letter trying to collect for the 2nd mortgage. I haven't been able to send them a payment for 18 months now.

Isn't Arizona a non-recourse state? I thought they couldn't come after me for any deficiency if the house foreclosed.

Could you let me know please? Thank you!

NBA @ 8:47 am:

hi Richard,
I would apprceiate if if you can give me some advice

1) I am working on short sale — your popular advise. I am working on that.

Here is my scenario for Georgia
1) single Job. No other assets. not worthy balance. credicard debt 10+ (I can repay that)
2) new Home loan 370k (1+2nd mortgage) (100% - 10 years interest only loan) — aug 2006
3) I lost job and missed 3 payments. back re wrote my mortgage (1+2 mortgage) (100% .fixed 40 years)
4) After rewrote home loan is 380k.
5) currenly same or similar house(new) in the same community was sold to 280K. I mean I am down 100K.
6) currently I can manage house payment, but like pay check to paycheck. which is not good, i can not wait until some thing happens (medical, loss fo job)
7) I am thinking of foreclosue (last option). I am worried about the second mortgage for 80K. Can this is negotiable to some thing less than 20K with a payment plan. this will help me to save in future.

if my scenario is possible with foreclosure, I would like to go haed. Can I buy your service for this. and what service is better.

carlene landroche @ 7:47 pm:

Is minnesota a non recourse state? and what would that mean for me if im 9 months behind on my mortgage and recieved a letter of acceleration?

Brian Belom @ 10:41 am:

Hey Richard,

I am in a pickle along with everyone else it seems. I have a home purchased 2 years ago. I used my VA benefit to make the purchase. The VA appraised the property at $210,000. I purchased the property for $170,000. I feel that it is probably worth $150,000 maybe. I'm located in Geargia. I also own a rental, single family home. I owe $111,000 on it and its probably worth $70,000. No 2nd on either proerty and am current on both at this time. I don't know whatto do at this point. Also, I've heard that since my primary is a VA insured loan, if I were to walk away, I would be hounded by the VA forthe rest of my life. Is this true??? Honestly, I would like to get out from under BOTH properties. I have even spoke with my lender on my primary residence about a loan modification, possibly lowering the principal loan amount. they will not even considertalking to me due to the fact that I am current??? How does that make ANY sense. they basically encourage you to stop making payments!!! I'm at a loss here. Any insight would be appreciated.



Andrew Mathisen @ 2:13 pm:


I live in Temecula, California and have two properties which are upside down due to the housing mess. I am not making payments on either of them and it has been over 2 years and the bank has not yet foreclosed. One of the properties is a investment loan for a SFR with a first of $325K (no cash) and the second is my former primary residence but I refi'd and took out $100K cash before the crash and currently owe a first of $590K. I cannot sell either of them for what they are worth.

Since it has been so long I am concerened that the banks are intending on foreclosing using judicial forecloures and attempt to do a deficency judgement. My primary home now has a good deal of equity and is in a revocable family trust and I also have a 401K. Do I need to worry about a deficency judgement with these circumstances and for which property or both of them? I appreciate your time and help!!

Have a Great Week,


Jodi Brown @ 12:48 pm:

i reside/;rent my brothers house in Calif. His name is on the loan, I pay the mortgage directly to the bank and have done so for the past 4 yrs. I am no longer able to pay the complete mortgage payment and my brother and I are looking at shortsale, my question is that the loan is through Fannie Mae and is recognized as a investment property will they come after my brother for the balance owed on the loan.

stephanie @ 1:12 pm:

I have heard that Florida is a non recourse state. Is this true.

natalie @ 2:44 pm:

i bought a house in california, but our lender is located in nevada. can our lender pursue us for financial losses resulting from a strategic default?

alexandra @ 3:34 pm:

I own a second home in California and live in it on a p-t basis with other members of my family and my second loan is a traditional hard money loan, not a HELOC, if I do a short sale can the lender get a deficiency judgment against me?

jim @ 11:57 pm:

Have faith

brian @ 3:55 pm:

hi Richard, i have read all comments but did not see these questions.

1. for a non-recourse investment property, if i decide to do a short sale/ forclosure, will there be cancellation of debt income?

2. investment property, $75k down payment. can i claim capital loss after a short sale?

LEN @ 12:56 pm:

I live in MICH. I have a condo in FLA. And I am in process of doing a short sale on the FLA property. After the sale can the lender chase me for the deficiency balance and take away my MICH home ? I will be paying $2500 @ closing and also doing a $5K promiory note. But, the lender will not sign off for the balance. What can I do to protect my MICH home ?

margaret bogdanska @ 11:42 pm:

Hello Richard,

I have been trying for a loan mod for a year and a half with B of A. Every time they give me a different excuse why they cannot do it. I have always been on time and have excellent credit. Now my payment will adjust in Dec from 1550 pm to 700 pm. However, I want them to put me in a 30 year fixed so I can sleep at night. House is upside down around 50 K. I can't find any lender to help me. Please help me with any info… God bless you.

Jean Michaelson @ 11:29 am:

Would it be possible to do a short sale on a condo with mold issues? No one ever talks about condos, only houses.

alan @ 4:10 pm:

I purchased a condo in hawaii through Countrywide in 2005,put 175 k down and survived 5 years at 6.5% but now, after 16 months without a job I have to stop making payments. Ive been told if I have a non-judicial mortgage which Ive heard most in 2005 were, I can short sale or walk. Im concerned about them attaching our condo on the mainland , which is now our personal residence, or what stock investments I have. Can they and how can you tell if you have a non judicial mortgage?

alan @ 7:38 pm:

bonnie: Im in the same position as you are in hawaii. Please write me if you find out anything!!

also sleepless in california

Sonia @ 10:15 pm:

Hi Richard,

We needed to move and was very lucky to buy a HUD and qualify with our other home. The other home became a rental, but we want to short sale. We owe 106K and can only sell it for 50-60K in AZ, will we be liable for he difference because it is now a rental?

MG @ 8:32 am:

What do banks do with all the financial information required prior to submitting a residential foreclosure package? Do they use that against the borrower later after the short-sale? Is a foreclosure NEVER recommended?

@ 10:50pm @ 12:53 am:

How long do the lenders have to come after the debtor in California? Do they always go after the debtor?

SAL @ 3:57 pm:

My wife bought a house in California in 2006 just before we got married, she took two loans 80/20 from indymac, the second got sold shortly to city bank, recently she tried to get a modification, second lender said yes but will depens on first who said no. We tried to convince first lender to no avail. So now we are trying to do a short sale, we have an offer and the first lender will accept on the condition that we make a cash contribution of money that we don't have. They told us that because we are current with our payments that why they are asking for this contribution. We did not want to damage (too much) my wife's credit that is in the 800's, which I learned is another reason why they are asking for money.

Do you know if we walk away if they hunt us for the deficiency, my wife is the only one in the title. am I liable for this debt that she aquiered as a single woman? will my credit also get affected?

In advance thanks for your help.

BOB @ 8:12 pm:

So if you have a primary residence in Nevada(under water) and move to a non recourse state is the Nevada deficiency judgment enforceable?

Lea @ 1:09 pm:

I live in Colorado and 5 years ago my house was foreclosed on. I had an 80/20 loan. The first lender foreclosed on the house. As I was having trouble paying the first loan I definitely was not able to pay on the second loan. It had been months since I paid on the second loan so I just assumed they went away or were aware of the foreclosure. I have recently received a letter stating that my second loan was sold and the new company wants to collect on that debt. When I called this new company that took over my second loan, they said that I am still responsible to pay on the second mortgage. Is this correct? Do I have any options?

Erma Lopez @ 2:31 pm:

Hi I live in Colorado and just had a rental home foreclosed.. We were under the impression that we had a redemption period but when we tried that it turns out that the laws changed January 1, 2011. We wrote letters to Wells Fargo trying to forestall foreclosure but Wells Fargo would not cooperate. Our renter wanted to buy the house but he didnt have the money before foreclosure. We have a second property that is owner occupied, can they come after the equity on the property that we live in now. We had mortgage insurance on the rental property.

Becca @ 3:06 pm:

Hi. I own a waterfront/canal front property in the Tampa Bay Area. I purchased this property in Jan. 2006 at the height of the market. I paid 599 K for it. I refinanced the loan a year later with two countrywide loans. A fixed Jumbo Interest Only for the first and a 7/1 ARM for the second. The total I currently owe is 571 K. The property is likely worth 250 - 275K right now. My son's father died of stomach cancer in June 2009 and left me with a 2 year to raise on my own. I decided it is best to move from Florida to Ohio to be near my family who can help me. I am currently renting the property to some friends under a 1 year lease. They are taking awesome care of the house and paying me $1200 per month.
I want to get rid of this albatross from my neck. I pay 3300 per month interest only on this monster. Can't afford it and a place to live in Ohio. BTW, my income is roughly 110 K annually. What do you suggest are my best options? Would Bank of America (now the servicer of both loans) even agree to write off over 200K of negative equity? Help!

Thomas @ 5:29 pm:

I purchased a home in california,I refinanced one time and took out 20,000 due to job loss,in a short sale situation,would I be liable for recourse now on monies owed and most importantly would there be tax implications from the state or IRS on any debt forgiveness with a short sale..thanks

Dalen @ 12:44 pm:

In California - if you bought a house and you got 2 loans to pay for the home. The first loan is 80% of the house and the 2nd loan covers the remaining 20%. Both loans are with separate banks. There has never been any refinancing.

If you decide to do a foreclosure - are both loans still non-recourse loans.

John @ 6:06 pm:


It seems like you keep saying that in California 2nd mortgages can always come after you based on the promissory note that was signed one they become "sold out" after the senior notes forecloses. Have you looked into CCP 580(b) regarding purchase money protection and how that applies to 2nd mortgages?

Thank you and I look forward to your response.


John Drennen @ 8:42 pm:

State of NV - Wife bought a house while married. Her husband Quit Claimed the property. A couple of years later, the wife lost the house in foreclosure via a BK filed. The husband did live in the house with her. Does the husband have any contingent liability for the 1st or 2nd mortgage since he was never on the loan??


AAC @ 3:14 pm:


we recently for closed our home in ca. it was a non judicial foreclosure. The first was with wells fargo and i had a HELOC with citibanak . I had no idea citibank would still ask for there money even after for closer. The heloc was a refi of our original second. We did not take the money to buy property, pay other debt etc. Now citibank has sold the loan to a collection agency and they have started to call. I have not got anything in writing from them yet.

I dont know what to do .. If i ignore them will they go away? do they have the write to come after us .. we have personal assets and another home

pls help

Steven Florin @ 2:45 am:

Hey Richard,

I am in Savannah, GA. Primary residence, non-judicial, with a PMI.
Haven't paid for 3rd month . Foreclosure process starts April 2 (90 days late).

If I buy your program would I be short selling the home myself?

It takes 45 days for chase home finanace to approve a short sale. As of today I have 55.

I could file "produce the note" to buy some time.

Thanks for your time

Steven Florin

vance @ 6:52 pm:

In the state of California can a lender foreclose on a property in which they do not have the deed and their is no equity on the property?

Larry B @ 8:30 am:

I have a mobile home on rented land in NC and we are far underwater with it, does a mobile home qualify for a short sale? the mobile home park owner has made an offer of $20,000 which is half of what I owe. If I buy another house and abandon it what recourse does the mortgage company have?

vance @ 11:59 am:

in the state of california can a lender foreclose on a property in which they do not have the deed and their is no equity in the property?

Kathleen S @ 3:07 pm:

We owned a home in Texas with 2 mortgages. After 18 months of unemployment and negotiation efforts with both lenders for a short sale, we walked away and the 1st mtg foreclosed. Now a year later a debt collection law firm contacts us wanting full payment of 2nd mtg. We are now in Maryland and are not aware if 2nd mtg holder has obtained a deficiency judgment. We made an offer of settlement but they want taxes, bank statements, debts, hardship letter, etc before they will take settlement offer to their client. Does this sound correct? Husband working but no assets over monthly debt but renting, no credit card debt, no car debt, so have to prove up technically insolvlent. Any suggestions or advise for us???

tom L @ 8:30 pm:

I live in california and i refinanced and I are getting to a point where I cant afford the house. does the bank have the option to go after my assets. I heard after refinance it becomes a recourse loan. Is this true that they can come after you assets.

Andy @ 3:44 pm:

Trying to foreclose on a Las Vegas mortgage, haven't paid in a year. Loan is with BofA. I also have a mortgage, in good standing, with BofA on a property in CA. The Las Vegas property is a primary residence. The CA is a rental, deed not in my mother's name, decent equity.

I want to get active in pushing the Las Vegas foreclosure through, but I don't want to alert BofA to my CA mortgage in good standing. I'm concerned they may link the mortgages putting my CA one in jeopardy. I've read that the exemption from 1099-taxes expires 12/31/2012, so I'm anxious for the foreclosure to finish. Is there a way BofA can go after my CA equity due to the Vegas foreclosure?

Jennifer @ 2:05 pm:

My husband and I are separated. I rent an apartment and he recently abandoned our marital home with 2 mortgages. One is paid to an individual and the second to a credit union. My question is, if i also walk away from the marital home, will they come after the condo I own and rent out? There is currently no equity in the condo as the value keeps taking a nosedive. It is now worth less than what I owe. I live in California.

Shazia @ 7:47 am:

We own a home in PA with 2 loans and a home in NY with one loan. PA is a recourse state, right? IF we shortsale in PA, can they come after the house in NY?

trina @ 12:19 am:

I need to understand this in laymans terms. In nevada they cannot come after you on a forclosure? What about a second mortgage? (80/20?)

trina @ 12:34 am:

another quick question. I guess a company called real time resolutions in texas bought our second mortgage in 2008 right after the forclosure. They contact me very vaguely every 6-8months but wont give me any information do I have anything to be worried about? have you heard about them?


They are probably one of the many zombie debt buyers. I wouldn't worry about it too much unless you have significant assets.



Dyan @ 11:17 am:

Do the walk away states such as Montana have the same rule on 2nd homes and on 2nd lein. In other words, are the second leins in Montana non-recourse in a short sale?

Benjamin @ 9:04 pm:

Hello, I live in Minnesota I am about 85k underwater on my home and I am 3 years into a 5 year A.R.M. . I tried a modification which under the government approved guidlines I qualified for but was declined by my lender because my income was too high. When I inquired on whethor they would refi me to a fixed rate they said they would do nothing unless I was behind 60 days.

With that being said what I didnt tell them is that I am holding all of the cards! I am not on the mortgage only my wife who no longer works. I am trying to decide between a short sale or just walking away unless they decide to work with me once it gets to loss mitigation principle reduction being the only option. The way I see it her credit is shot (and now useless with her not working) eithor way and I qualify to buy a home any time. WHat do you think?

One additional question I see Minnesota listed above does that mean the lender can not come after us for the deficiency? Can they go after assets in MN? On the table of deficiency states its listed as not-practical for MN.

Thank you in advance!

Tawnya @ 10:31 am:

Our home was foreclosed on Nov 9, 2010 and the six month redemption period was up on May 9, 2011. Now our 2nd mortgage company called today to say that they would be willing to covert our $13,000 mortgage to a 5 year fixed rate at 7% with our 1997 1/2 ton pickup, 2000 buick century, & 1997 camper as collateral making the monthly payment over $300 a month. I live in Minnesota. What recourse does the 2nd mortgage company have and what are my rights?
Thank you in advance for all your help.

Sabrina @ 9:38 pm:

My mothter had a living trust and now she has passed away; i was named trustee to help her while she was alive with things and was also the sole beneficiary to her trust (IRAs, small trust account, and 3 properties). However, i am not interested in taking on or inheriting one of the properties especially since its under-water and is worth less that what is owed on the loan. Can i "disclaim" this property? The properites are still titled under the trust. Or can i walk away from the property without it affecting my credit or financial futre, since the property is not in my name. Can the banks go after the trust? Can they go after what was in the IRAs? Can they go after what was in her Bank accounts not set forth in the trust? I was named sole benificiary on the trust, then after me was her sister-in-law. Please advise! I live in California. Does much of your informational video also apply in this situation?

James M @ 12:32 pm:

Question? What will a bank do if they find out that a house that they are trying to foreclose on is no longer on the property? I had a home that was demolished three years ago to build a new home and the payments were being made up until I suffered a financial hardship and now the property is in foreclosure? What are the chances that the lender (Saxon Mortgage) will seek a defiency judgement against myself the homeowner? The property is located in Georgia. Are there any other consequences that could be face? Again, what will a bank do if they find out that a house that they are trying to foreclose on is no longer on the property?

glenn @ 2:42 pm:

Hi. Me and my wife live in oregon and have an 3wide maufacture on a 4acre property here. We bough it for about 4 years ago. Now my wife is sick in terminal cancer and stopped working. We are totally over the edge(still paying thu) in Our economy, and want to , just get away from the house. BUT, the market is so low now so we cant sell to pay the loan back. Like I said, we just wanna get rid of it, and is that short sale an option? It is a really nice place, with wiew over town and everything..but. How do we do? Thanx Glenn


Don't see why a short sale isn't an option, Glenn. It can be done on autos and houses, why not manufactured housing? I am sure it can be done. The process is the same as for real property. If you talk to the lender you may be able to get the short sale done by finding a new buyer at today's market price or 10% or so below market, and submit the buyer's documentation with your own. Make the sale "subject to lender approval."


–Richard Geller

Cary NC @ 3:32 pm:

I just paid down $10k from savings to be able to get an FHA refinance of my ARM. I considered walking away a year ago and tried the modification program but was declined. I ultimately decided my credit rating was more important and I got myself into this mess. Did I make the wrong decision? Could I have walked away and not been sued over an estimated $25k deficiency in the state of North Carolina?

Larry @ 12:48 am:

Hello Richard,
We have 2 - Investment 4 plexes in CA. 30% or more underwater on loans made by u in 2004-5 and left to my sister and I by my Dad. These are still current but are losing money (negative cash flow) every year. Interest is 6 1/4% 30 yrs. What is the best way to negotiate a lower interest rate or get a reduction of principal to current market value, with the lender(s) Should we stop paying the loans and recover some of the lost funds and then negotiate when the loans are in default or possibly engage an attorney to help research the loans (which were both handled by mail) and handle the process or what? There is also several other inherited property (assets) which are not underwater without any loans.

Thank you for you comments

Candis Gillett @ 9:31 pm:

You are incorrect:
If you buy a house in Nevada after Oct 1, live in it continuously as your primary residence, and stop paying your mortgage, even if the bank comes and takes your house, you cannot be sued for the difference between what you owe and what the bank gets for liquidating your house! It is a very powerful statute for homeowners in Nevada!

This tremendous decision was passed in the Nevada Legistlature back on May 28, 2009 as a part of AB 471.

Judy @ 4:22 pm:

@ Lawyer NRS 40.455 Deficiency judgment: Award to judgment creditor or beneficiary of deed of trust, but in no event may the application be filed more than 2 years after the initial foreclosure sale or trustee’s sale. Is this NRS pertaining to a 2nd Lien Holder with the 2 year rule listed? I was informed that the 2nd lien holder has 6 years to file a judgment against me. If so, Can you please cite the NRS?

Joan @ 6:56 pm:

I have an upside down mortgage. Actually my house is worth less than 50% of what I owe the bank. My neighborhood and schools are not good. I have been preapproved for a new mortgage. I want to move and rent my house, but am afraid that I cannot afford two mortgages if my tenant does not pay up. Is this a risk worth taking?

J.F. @ 8:40 am:

Is Illinois a non-recourse walkaway state? I previously filed bankruptcy a year ago, and did not affirm my mortgage at that time? what recourse would they have against me?

Nancy @ 3:28 pm:

Hi Richard,

My retired parents were bullied into buying a condo in the outskirts of Phoenix a few years ago for $200K. It is now valued at $120K. They live in Canada and were using the condo as a rental/vacation property. Because the rental income does not cover the mortgage payments and management company fees, they are now in the hole about $10K drawn on their Canadian Credit line and have started having conversations with US Bank about short selling. Since they are Canadians do you think walking away would be better? This is not their personal residence. They don't care about the impact on their credit as they are retirees on a limited income. Will they be assessed US tax on the sale?

Please help, we are very confused!

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Karen @ 7:28 am:

My home in Florida is set to be sold on the court house steps in August. Can the bank come after me for the deficiency in the mortgage amount?' How fast will they come after you and how do you protect what assets you have left?
My Mom is looking into buying a house here for me to live in and I want to give her the down payment can I do that without any problems?

Bill @ 10:34 pm:

Thanks for the info, but it is weird to say Texas is non-recourse, but deficiency judgments can be sought, which is the definition of a recourse state.

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joe @ 11:27 pm:


Im currently being sued for a breach of contract; deficiency action. After having my home went through a trustee sale in Arizona. i thought Arizona was a non-recourse state if the lender chooses trustee sale instead of judicial foreclosure? If thats the case whats my defense?

Thelma Press @ 2:40 am:

In 1975 I bought a townhouse. I paid $55,000.00. I put $10,000.00 down and assumed rhe sellers Mortgage for 45,000.00 at 9 1/2 %. with Chase Bank.A few years later I refinanced the loan at 6 1/4% so that my payments would be lower.(I didn't take any money out.). About 6 years ago I took out a home equity loan with Bank of America. for $60,000.00. My son was making the payments. After about 2 years he could no longer afford to make the payments.No payments have been made for some time now. I asked B.of A for a loan modification program hoping to get a workable payment. I was given the runaround and told there were things they could do and then reneging on their promises, handing out misinformation and making it impossible to contact them. I was told to make a few payments to show good faith. B.of time since I have heard from them A will take a payment in Las Vegas but NO ONE locally has any authority to handle anything else. Now it has been some time since I have heard anything from them. No correspondance at all. Las year I filed for Bankruptcy. The attorney did not include the home equity loan in the bankruptcy. I have paid on my 1st mortgage , with Chase, faithfully. Also my homeowners dues. Never Late. Never missed a payment. After 36 or so years I still owe $34,000.00 on the first mtg. I am 81 years old., live on a small fixed income , have no other assets. and can't possibly pay the Home equity loan . The homes here are now selling for less than I paid 36 some odd years ago. The same model as mine (in great shape) just sold for $52,000.00, and some even less. I would really like to know what B.of A's intentions are. I don't want to be surprised and have my home taken away from me. Richard, What .should I do ?

Dave @ 8:13 am:

I bought my first house in Oregon and am $70,000 under water. I have enough income to qualify to buy another house that will meet the needs of my growing family. This is the original loan, I have never refinanced. What would happen if I bought another house and walked away from the first.

Glen @ 11:18 am:

My house is in Oklahoma. We moved back to California because my wife's grandmother was very ill (she has since passed). We tried to keep the home in Oklahoma by attempting to get someone to rent it. We could not. We have also had no luck selling. It has been broken into 3 times and we just can not keep up the payment and repairs. My question is since we live in California but our house is in Oklahoma do the foreclosure laws regarding deficiency fall under Oklahoma law or California law? Will the lender be able to garnish our checks?

Thank you in advance


Steve Ski @ 12:12 am:

Richard, It appears as if you teased everyone with your "answers" online then, after a few days/weks, quite posting your answers. This si a bif red flag to me. I was reading all the q/a's on this blog and after I kept seeing people ask you questions with no responce, it apprears as if you are not interested any more. What gives? If you are persoanlly messging these people asking you questions that matter to thier whole life, you might let everyone esle know. If you are in this to make a buck, then I hope you fail misserably.


Thank you for the feedback, Steve. It's very hard because I have 9000 students and 105,000 subscribers and our students get most of my attention.




MSR @ 10:33 am:

I know someone whose house already went to foreclosure in Texas. There were two lenders and the person has received requests for payment of the loan from one of the lenders since the loan years after the house already went to foreclosure. The amount is hundreds of thousands of dollars and he can't afford to pay. No documentation stating that there was a judgment against him was sent. What should he do?

DON GRIM @ 10:46 pm:

I live in washington and have an equity loan on my house…but NO MORTGAGE.
I owe about what the house is worth….I don't understand where I stand on this.
I lost my job and will be 62 soon. Can I go bankrupt and give em the house or can they come after me for any more $$ like costs fees ect???

Tick @ 5:32 pm:

Georgia is a recourse state as well… They have 30 days after the sale of the foreclosed home to seek a deficiency judgement outlined in OCGA § 44-14-161

CS @ 3:55 pm:

Hi Richard,
My husband and I owned a home that was foreclosed on over a year ago. There was a second on the home and they are still holding us liable for the second. We do not own anything else, and are not able to pay this. should we consider bankruptcy? What are our options-

ChrisJ @ 12:05 pm:

Under NRS 40.455, "3. If the judgment creditor or the beneficiary of the deed of trust is a financial institution, the court may not award a deficiency judgment to the judgment creditor or the beneficiary of the deed of trust, even if there is a deficiency of the proceeds of the sale and a balance remaining due the judgment creditor or beneficiary of the deed of trust, if:
(a) The real property is a single-family dwelling and the debtor or grantor was the owner of the real property at the time of the foreclosure sale or trustee's sale;
(b) The debtor or grantor used the amount for which the real property was secured by the mortgage or deed of trust to purchase the real property;
(c) The debtor or grantor continuously occupied the real property as the debtor's or grantor's principal residence after securing the mortgage or deed of trust; and
(d) The debtor or grantor did not refinance the mortgage or deed of trust after securing it."

This leads me to believe that there is an exception for primary mortgagors in NV who live in a single family residence to make this non-recourse state for homeowner foreclosures of primary residences. Have I interpreted this incorrectly?

krystle @ 6:41 pm:

I purchased my inital home as a primary residence in 2006. I bought a new home a year ago, moved to the new home and have rented the first one one out for one year now. I purchased that home(thats now rented out) as a principle residence and never refied, never got a loan mod or 2nd…etc. So most would say its a NON RECOURSE loan since its purchase money only.

Since ive rented it and NOW its an investment, does that make it a recourse loan?

Tom M @ 3:39 pm:

I am upside down on a mortgage in NH, and am really struggling to pay it. I lost the job I used to have when things were good. I just came across a cash settlement unexpectedly that would allow me to pay cash for a bank owned property nearby. The settlement would not really help out much towards refinancing, so my question is how do I walk away from my upside down mortgage without worrying about the mortgage company coming after the house I pay cash for from the settlement? Any help would be greatly appreciated.

Tim @ 4:23 pm:

I own a house in CA and purchased a house in AZ as a second home. If I shortsale the house in AZ, will the lender still be able to go after me for the deficiency? Will they sue me to get house in CA? Thank you.

A.J. @ 3:28 pm:

Does a short sale work the same with a USDA loan? we are underwater on a direct (502) loan from the USDA on a condo that we are renting out. the rental income doesn't cover the mortgage payment fully though, after tax/dues. Will the USDA accept a short sale even if we are current on our payments? thanks

Erin @ 9:20 am:

We have been trying to sell our house for three years. Started the short sale process with an agent in Jan. We had two offers on it and thought we were about to get accepted when we found out that the home had been foreclosed on last week. We live in Utah and did get notice of the sale, but were told by the bank last week since we had an offer the sale had been postponed and there was no sale date. We have a tenant who also had no notice. We have two loans on the house (both used to purchase the home) Can the banks go after us for both? How do we proceed from here? We are very scared.

Ruth Peterson @ 12:23 pm:

Is Missouri a Deficiency Mortgage debt state? Can the bank sue me for what they do not get from an auction?

Dan @ 4:16 pm:

Last time I looked (which was, I admit, over twenty years ago) Colorado was also not a non recourse state. When did that change?

I lived there during the '80s downturn and watched a friend lose everything when a bank would not renegotiate a very high interest loan on property after rates dropped and the gentleman move out of state. Very sad.

John @ 10:15 am:


I live in Washington State. I have a ballon loan payment due in 1 year for a 5 acre lot. The terms of the loan were 5 years of payments (interest) and a ballon payment at the end of the term (5 years). The ballon payment is due in December 2012 (next year). I purchased the land for 255,000.00. The land is now worth about 140,000.00. The ballon payment is 250,000.00. Total interest payments made during the 5 year term are about 115,000,00.

I will not be able to pay the ballon payment next December. I can't obtain a construction loan (in order to roll the land into building a new home), as the land is not worth what I paid for it, and I cannot sell my current home because of the loss in its value (I owe more than it's worth).

What are my options in Washington State? What kind of exposure do I face?

Any advice would be greatly appreciated. I don't know what to do at this point.


What's so bad about bankruptcy? I realize this fellow is trying to sell his Program, but I took bankruptcy, am keeping my house with no problems attached, making all payments on time on it, mortgage holder won't talk to me about refi & stalls me by saying they "can't locate" a paper the bankruptcy attorney FAXed to them 4 different times (it is Seterus, & they really SUCK, they bought my mortgage when Chase bailed out when they found out I was filing bankruptcy). I still get all kinds of credit card offers, & I return them in their Postage Paid Envelope with request to take me off their list. I pay all bills on a day-to-day basis, nothing even 1 day late! I am slowly building a small savings in case my 1999 car takes out or my house needs a $1,200 water line run again! Other than that, I sleep well, eat well, feed my 6 doggies well, & everything is OK! I don't need any more credit, especially credit cards, so I haven't applied for any credit & don't plan to! I'm 73 years old & will have to live to 98 to get the house paid off, but if I kick off before then, my children can do what they want with the house (they'll probably keep it, as my son has other rent houses). I have 3 debit cards, one with my main bank, one with a credit union in another town close by, & one with PayPal, for Internet purchases. I don't need any cash, as I use these debit cards just like I was using credit cards. I don't go out much, mostly to the Post Office & a few local stores & church, usually running my car 2-3 times a week. I buy ABSOLUTELY NOTHING I don't need, unlike the days when I had 15 credit cards! They make up the rules as they go along; they loan you some $$$ at 0% then want to raise it to 39% & add fees, so I told them where to stick their credit cards! They thought they were gonna screw me, but I screwed them! Revenge sure is sweet! The only time the word "bankruptcy" has come up in the last year is when I tried to get a $1,500 "courtesy extension" on my checking account with my bank, where I've banked for 35-40 years, to cover any overdrafts, & the gal said it was declined because I had taken bankruptcy. I didn't need it anyway, as I've got enough in the account to cover whatever comes in, plus a little extra, that they pay me 0% interest on! Big deal! Taking bankruptcy was the easiest thing, as I've NEVER even seen a Federal Judge, I've not appeared in any Federal Court, they handle it all by mail & phone, I have my bank send them their fee each month (never even 1 day LATE), I had to take a class on not getting any more credit cards (which I wasn't gonna do anyway), & I had to appear before one of the Judge's lackeys one time to testify that I was who I said I was, that all the paperwork was correct, & all that legal garbage. My attorney wasn't even there, but sent an attorney with another law firm instead. Nothing to it! I'd do it again, if I had to. I can stay in my home for the rest of my days, as long as I make the payment each month. I don't need any credit. I don't need much of anything, just a little more time! Go for it! You'll be glad you did, & you'll laugh at the credit card companies who want to suck you back into the TRAP of sending them some $$$ each & every month! My attorney told me I was wasting my $$$ & to quit paying them. I did. A month later, my phone rang off the hook, 20 or more times one Sunday afternoon. I let my answering machine get it. One company was real cagey, saying "please hold for an important message." I held, & a man came on the line wanting some $$$, so the message wasn't important to me, but it was to them. Next time the machine said to hold for an important message, I hung up. One lady kept wanting to know if this was Mr. Dreuckebdodevitskovitz, & I told her she had not identified herself & that I didn't speak to unidentified people over the phone. She said she was Ms. Jones with ABC Company. I asked her what ABC Company was, & she told me some name, turned out it was a collection agency, which I figured it was. I never told her who I was, she thought I was the butler, but she couldn't talk to me until she verified that I was Mr. D, so she finally got frustrated & hung up. Another company called after I had filed, & I called them back & instructed their machine not to call me any more. The next day they called again, so I called them back & recorded them, got a hold of a man who didn't know if he had an outbound call or an inbound call, & I made a recording of him stumbling around, but I verified that they had called me IN VIOLATION OF THE COLLECTION AGENCY ACT, & I am trying to sue them for $1,000 because of this! I've had a lot of fun with this whole thing, especially the collection agencies. Bankruptcy is great! I recommend it for everybody. If everybody took bankruptcy, think what would happen with the credit card companies, the banks, the mortgage companies, all of them thinking they're in control and scaring the wits out of these poor helpless folks! B of A is the worst, as their President told Obama where he could put his financial program, while taking BILLIONS in loans from the U.S. Govt. Shame on them! Don't do business with B of A, if you can help it. There are lots of other banks around!

Kathy @ 1:13 pm:

I have two mortgages on my home. I have been going through the short sale process for over 90 days. I found a buyer the first week the house was listed back in September. I took a month or so for the first mortgage to respond. They have been willing to approve the sale for the listing price (little over $100,000 less than what is owed). However the second mortgage is not willing to approve. They are holding up the process because they say they are not getting enough offered to them.
If the second mortgage do not approve, what is the best option to use next?

Thank you,

ron @ 8:57 pm:

Hi, I enjoyed listening to you recording. I am someone that has an interest in buying non performing second mortgages in san diego at lowest price. Are they listed somewhere? Can you help me.
Ron paden

Henry Stone @ 11:32 am:

Hello Richard,

I have a condo in St. Croix, US Virgin Islands that I bought with the intentions of retiring to, until the 2008 meltdown. I have tried selling, and I have had no offers, at any price. Is the USVI non-recourse, or is this a boat anchor around my neck?

Thanks in advance for the help!

tina dailey @ 3:27 am:

condensed story: boyfriend and I bought a house and two rental properties together in NC. boyfriend and i broke up with the agreement that he would refinance and keep two rental houses, and I would keep and refinance the house we were living in. I was able to refinance the house we were living in. He moved into one of the rental houses and wound up getting laid off from his job never refinancing either rental property. upon checking my credit report the house he's staying in was not getting paid upon and was listed as a charge off. mortgage, late fees, taxes still adding up and he refuses to leave so that I could at least get a paying tenant in there. I doubt a refinance is possible since the charge off is on my credit report. do you have any ideas?

Mitchell Roberts @ 3:25 pm:

Are New Jersey and Pennsylvania non-recourse states?

John @ 1:05 pm:

Hi, thank you for the informative video!

Do you have any thoughts on a VA-guaranteed mortgage loan that has been streamline refinanced twice? Washington state, primary residence, 25% underwater, no second mortgage.

I am interested in learning more however, I think I may be outta luck with this one.


Sele @ 12:34 pm:

Hi. I had 2 foreclosures, on in California and one in Idaho. Never took money out, but I had a first and a 2nd purchase money. This was 3 years ago and the 2nd (PURCHASE MONEY HELOCS) are harassing me and I was told that after a foreclosure I can buy a house going FHA financing in 3 years, but the 2 seconds are showing up as open mortgages that are currently late and I didn't think this could happen. Help……………..

Alex @ 11:59 am:

Hi there,

I have a piece of land in N.Carolina with TD Bank. Land is now worth $5k at best, as developer walked away and I was not able to build house on it, get electrical to it/sewer etc… hell, there are no finished roads so i can't even reach the land now. Loan is for $160k, I now live in California but land is in NC which is a recourse state. there are no options for a short sale as there are no buyers.

can TD Bank come after me as a California resident now… in other words, is the recourse issue a residency issue or does it depend on which state the property is located in.

thank you.

Nina @ 2:03 pm:

Hi Richard,
We need advise urgent. We live in Canada and we bought property in Arizona 6 yrs. ago $80,000 mobile home. We had lot of expenses since than, not to mention renting for small amount and paying mortgage with 8% interest, plus all other expenses, fixing roof, new carpet, stove, air conditioner etc. We could not rented for more than a year. We tried to contact owner if he can reduce interest rate couple of times and he ignored. All together we lost. Now this property is not even worth $30,000. We paid $30,000 allready through mortgage. Now he is making presure to pay him out and asking $50,000. We want to walk away but not sure what liability is. Please advise it is urgent. Thanks.

Eli. @ 7:00 am:

I have had a Foreclosure on my second property in California in October of 2009. How long it is going to stay in my Credit Record and have a negative effect on my credit score?
Since my loan was a non-recourse, does the bank will come after me for the first or second loan in the future?