Foreclosure in Orange>Question Details

Calvin, Home Seller in Orange, CA

For primary residence home mortgage, can banks go after your amount deficient after short sale/foreclosure?

Asked by Calvin, Orange, CA Thu May 14, 2009

I was told by someone on the financial side of the business that in CA, despite nonrecourse, that the banks have the option of getting the deficiency however usually they decide not to. I thought non-recourse means not at all.

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If the property goes through a foreclosure, then they will not bw able to go after your other assets, If you are doing a short sale, you would want to make sure that the lender releases you of future liabilities, and do not sign an unsecured new note from your lender, some of the lenders have tried to do it. email me at Jessmend@yahoo.com and I can forward some publications regarding short sales and foreclosures. For your situation you may want to consult an attorney to advice you of your rights, I have a couple of names if you need one. Call Jess at 714-264-5890.
thanks and good luck
Jess
Web Reference: http://www.theOCMLS.com
0 votes Thank Flag Link Thu Jun 25, 2009
Hi Calvin, I'M NOT A LAWYER, nor am I aware of ALL the details of your circumstances.

In a successful Short Sale the lender agrees to take less than what is owed, so a deficiency is not possible.

There a number of ways a lender may or may not be able to go after personal assets via a deficiency judgment after a foreclosure, but it makes a difference on how the property is foreclosed.

For a Owner-Occupied where:

1) A lender made a purchase money (non-recourse) loan, then NO deficiency judgment can be attempted. If a senior lienholder forecloses on the property, the "wiped out" junior lienholder who no longer has a secured note may not sue on this promissory note.


2) A Seller financed a purchase money loan (non-recourse), NO deficiency judgment can be attempted (non-recourse loan). If a senior lienholder forecloses on the property, the "wiped out" junior lienholder who no longer has a secured note may not sue on this promissory note

3) You as the owner of the property, refinanced the property (recourse loan), then a deficiency judgment CAN be attempted if a judicial foreclosure was used (as opposed to a Trustee Sale). This is NOT allowed under a trustee sale foreclosure. HOWEVER, if a senior lienholder forecloses on the property, the "wiped out" junior lienholder who no longer has a secured note MAY SUE on this promissory note.

IN ANY CASE, A REAL ESTATE LAWYER SHOULD REVIEW YOUR SITUATION!

If you would like more information on this subject I have a few documents you may find useful, just email me offline and I'll send them to you.

Best, Steve
0 votes Thank Flag Link Tue May 19, 2009
Hi Calvin,

California is a non-recourse state...so if the home is sold in a trustee's sale, there is no recourse for any mortgages. The exception is if they decide to foreclose through a court action (which really rarely happens).

In a short sale....before we accept the terms from the bank...we need to make sure they are releasing all interest in the property. They do this via the approval letter and if we don't see that clause, then we don't go through with the short sale. So this way you are protected. I actually show my sellers the exact paragraph where the bank releases the seller.

Additionally...the Federal Governement and California State Legislature have both passed laws which prevent lenders from seeking a deficiency judgement on your primary residence after a foreclosure. This is a short term break from the normal laws and was included in the Mortgage Relief Act of 2008.

I would be happy to talk with you about your specific situation if that would be helpful? If so...send me a private email and we can chat a bit more.

Karen
0 votes Thank Flag Link Fri May 15, 2009
Calvin,

If it is your original mortgage for the purchase of your home, it is non recourse and the lender CAN NOT get a deficiency judgement against you. That is the law in California. Even if it's a refi the chance of the lender going for a deficiency judgement is infinitely small as they have to waive their right to a trustee sale and file a lawsuit against you to recover the property. It takes far longer for them to get the property back that way and gives you additional rights of redemption you don't have with a trustee sale.

Hope this clears it up for you.
Web Reference: http://www.wehelpubuy.com
0 votes Thank Flag Link Thu May 14, 2009
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