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.
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.
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.
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?
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.
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!
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.
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.
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.
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.
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.
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.
Richard,
I've been reading Ripoff.com'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.
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.
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?
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!
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
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.
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.
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.
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.
I AM CONSIDERING PURCHASING YOUR PROGRAM, HOWEVER, I HAVE MY REAL ESTATE LIC BUT I AM ALSO IN SOME FINANCIAL DISTRESS WITH MANY RENTAL PROPERTIES AND CREDIT CARDS.. WHICH PROGRAM SHOULD I BUY?? DOES THE PRO EDITION ALSO CONTAIN ALL THE OTHER INFORMATION IN THE LESS EXPENSIVE VERSION? I AM WANTING TO GET HELP FOR ME BUT ALSO INFORMATION TO HELP MY BUSINESS. THANKS
If you are in the real estate business get the Pro edition.
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.
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.
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?
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.
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 support@mortgagereliefformula.com if you are in the Fairfax, VA area.
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.
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…: )
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?
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.
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 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?
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?
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?
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.
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?
PLEASE HELP ASAP!!! MANY KIND THANKS. Desperate
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?
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.
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.
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.
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?
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.
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,
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.
Katie
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:
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?
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.
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.
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.
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.
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?
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.
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.
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.
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.
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!
Hi,
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?
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?
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?
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
assets.
But this isn't the best thing for your FICO score.
So you may want to negotiate with the lender on a short
sale.
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.
warmly
–Richard (keep in mind I am not an attorney,
and may be wrong. You have to do your own due
diligence please.)
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.
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?
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?
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
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 ?
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
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?
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???
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?
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,
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 ?
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?
thanks
Bob
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!
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?
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.
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.
Thanks
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.
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!
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 ?
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?
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.
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
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.
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?
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?
Richard,
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?
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…
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?
Thanks,
J
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!!!
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.
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.
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?
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.)
[…] 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). […]
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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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?
Richard,
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?
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?
Richard,
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?
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.
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.
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??.
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.
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.
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.
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
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.
Don
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
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??
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?
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?
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?
Thanks!
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.
Hi…….I've got questions???? CA.is 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.
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
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
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???
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?
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.
137 Comments on List of non-recourse mortgage walkaway states »
March 20, 2008
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.
March 25, 2008
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
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.
March 31, 2008
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!
–Richard
April 10, 2008
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.
April 30, 2008
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?
May 1, 2008
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.
regards
–Richard
May 9, 2008
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!
May 10, 2008
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,
May 12, 2008
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.
regards
–Richard
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.
regards
–Richard
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.
Thanks
May 13, 2008
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.
regards
–Richard
May 19, 2008
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.
June 9, 2008
Walt Watson @ 1:59 pm:
Richard,
I've been reading Ripoff.com'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.
–Richard
June 10, 2008
Walt Watson @ 12:26 pm:
Richard,
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?
Thanks.
June 11, 2008
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
–Richard
June 12, 2008
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
July 17, 2008
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
July 24, 2008
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.
August 5, 2008
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.
August 12, 2008
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.
warmly
–Richard
August 21, 2008
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.
warmly
–Richard
August 29, 2008
SHARON @ 12:29 pm:
I AM CONSIDERING PURCHASING YOUR PROGRAM, HOWEVER, I HAVE MY REAL ESTATE LIC BUT I AM ALSO IN SOME FINANCIAL DISTRESS WITH MANY RENTAL PROPERTIES AND CREDIT CARDS.. WHICH PROGRAM SHOULD I BUY?? DOES THE PRO EDITION ALSO CONTAIN ALL THE OTHER INFORMATION IN THE LESS EXPENSIVE VERSION? I AM WANTING TO GET HELP FOR ME BUT ALSO INFORMATION TO HELP MY BUSINESS. THANKS
If you are in the real estate business get the Pro edition.
warmly
–Richard
September 8, 2008
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.
warmly
–Richard
September 10, 2008
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?
September 21, 2008
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.
warmly
–Richard
September 22, 2008
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)
BJ
September 24, 2008
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.
warmly
–Richard
September 28, 2008
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 support@mortgagereliefformula.com if you are in the Fairfax, VA area.
warmly
–Richard
October 4, 2008
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.
warmly
–Richard
October 5, 2008
Rahiel @ 11:07 pm:
Hello,
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…: )
October 7, 2008
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?
October 10, 2008
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.
October 23, 2008
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.
warmly
–Richard
November 3, 2008
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?
November 8, 2008
David Triol ( i love this type of knowledge) @ 10:04 am:
IN BPO's do banks look at some broker's real estate companies as more credible, and what about real estate appraisers?
November 10, 2008
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?
November 13, 2008
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?
November 15, 2008
franci j @ 3:51 pm:
richard,
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.
December 13, 2008
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?
PLEASE HELP ASAP!!! MANY KIND THANKS. Desperate
January 3, 2009
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?
Thanks,
Steve.
January 19, 2009
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.
warmly
–Richard
January 20, 2009
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.
January 22, 2009
Jim Campbell @ 3:33 pm:
Richard,
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.
January 24, 2009
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
January 31, 2009
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.
warmly
–Richard
February 3, 2009
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.
Katie
February 9, 2009
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:
http://www.loansafe.org/forum/deed-lieu-foreclosure-do-you-need-help-walk-away/
February 14, 2009
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?
February 17, 2009
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.
warmly
–Richard
March 2, 2009
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.
warmly
–Richard
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.
warmly
–Richard
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
March 7, 2009
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.
warmly
–Richard
March 13, 2009
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.
March 14, 2009
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.
warmly
–Richard
March 16, 2009
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.
warmly
–Richard
March 20, 2009
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!
March 27, 2009
M. Thompson @ 2:04 pm:
Hi,
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!
March 29, 2009
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!
April 1, 2009
James @ 10:28 am:
Just a quick THANKS for this presentation. Good information. — James
April 9, 2009
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?
warmly
–Richard
April 10, 2009
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
assets.
But this isn't the best thing for your FICO score.
So you may want to negotiate with the lender on a short
sale.
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.
warmly
–Richard (keep in mind I am not an attorney,
and may be wrong. You have to do your own due
diligence please.)
April 13, 2009
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.
warmly
–Richard
April 22, 2009
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?
May 3, 2009
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
May 13, 2009
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 ?
May 18, 2009
daz @ 8:47 pm:
is texas non-recourse state? I am confused with the list above.
June 2, 2009
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
June 3, 2009
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?
Thanks!
June 18, 2009
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???
July 22, 2009
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!!
August 15, 2009
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 ?
August 31, 2009
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?
thanks
Bob
September 8, 2009
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!
September 9, 2009
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.
warmly
–Richard
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.
warmly
–Richard
September 11, 2009
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.
Thanks
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.
Source: http://www.loansafe.org/forum/refinance/771-do-you-have-2nd-mortgage-important-info-california-homeowners.html
September 12, 2009
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!
September 18, 2009
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 !
September 21, 2009
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?
Thanks
Dave B
September 22, 2009
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
September 29, 2009
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.
September 30, 2009
Pete @ 10:10 pm:
Thanks for the informative video, I learned a lot!
October 2, 2009
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?
Thanks,
Rick
October 28, 2009
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?
Thanks,
Vic
October 29, 2009
Jan @ 3:29 pm:
Richard,
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?
November 5, 2009
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?
Thanks,
J
November 16, 2009
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!!!
November 24, 2009
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.
December 5, 2009
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.
December 25, 2009
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?
December 27, 2009
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.)
December 31, 2009
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.
January 2, 2010
Housing collapse prompts growing focus on strategic defaults on mortgages | RetirementRevised @ 10:13 am (Pingback)
[…] 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). […]
January 11, 2010
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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January 12, 2010
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?
January 14, 2010
Pam @ 7:07 pm:
Richard,
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?
January 23, 2010
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?
January 25, 2010
Tex @ 11:47 am:
Richard,
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?
January 26, 2010
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.
January 30, 2010
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.
February 2, 2010
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??.
February 3, 2010
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.
Steve
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.
Don
February 8, 2010
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
February 14, 2010
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??
February 16, 2010
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?
February 17, 2010
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?
February 21, 2010
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?
Thanks!
February 22, 2010
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.
February 23, 2010
Virginia @ 8:00 pm:
Hi…….I've got questions???? CA.is 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
February 24, 2010
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
February 27, 2010
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
March 2, 2010
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???
Thanks,
Joe
March 8, 2010
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!
Chris
March 16, 2010
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.