Hi, we have a rental that was our primary, but refi'd after we moved out. What is our risk if we walk away?

Asked by Song McDonald, Temecula, CA Mon Jun 13, 2011

We bought a home as our primary residence, subsequently bought and moved into another home. We turned the first house into a rental and then refinanced that house. Of course, we're undewater on the first house. We're trying to sell the house but want to know what our risk is if we walk away. We also have another home that we bought as a primary residence but are seriously underwater on this house as well. We have not refinanced this 3rd house. Is this 3rd house still a no-recourse loan. I can't find phrasing on any of the 3 notes/deeds that describes the type of loan

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RonS, , Concord, CA
Thu Jan 8, 2015
did you refinance it as an owner occupied property? You said you "Subsequently" bought and moved into another home, THEN turned subject property into a rental and refinanced. If you said it was occupied by you, you subject yourself to prison for fraud. There isn't a lender out there that would do a refinance for a borrower under water unless it was an agency (Fannie/Freddie) loan. If you said you were occupying a fannie/freddie loan for a refi, i'd be very very very careful about walking away and exposing the fraud. I'm just assuming here but from what you wrote, it doesn't appear to be possible to do what you did without claiming it as your primary.

The notes/deeds don't dictate whether its recourse or not. Well, they may but the state guidelines will dictatate recourse/non-recourse and if you are in California, it's a non recourse state. That seems to be the least of your issues though. If the lender claims fraud, even non recourse loans in California could be subject to recourse.
0 votes
Matthew Jime…, Mortgage Broker Or Lender, Reno, NV
Thu Aug 15, 2013
Refinance Loans in California are "Recourse", i.e. the lender can come after you for any deficiency.
I would check with your lender and your accountant to determine any potential liability. Many lenders
are not pursuing this today. It is most wise to check and make sure. I am licensed in Calif and Nevada. I can help.
Matt Jimenez
0 votes
You don't know what you are talking about Matt. Read 580b, 580d and 580e.They are NON recourse in California. Your lender and accountant probably know less about it than you do.
Flag Thu Jan 8, 2015
Alexander Gr…, Agent, San Jose, CA
Thu Aug 15, 2013
I was just looking through old post and I noticed yours. If you were not able to refinance at the time of the post, I can certainly help you out now. You can call me at 408-352-5147 or email me at AGreer@themortgageoutlet.com. You can check us out at http://www.TheMortgageOutlet.com. I will look at your situation and present you with some options.

Alex Greer
NMLS #1056079
0 votes
Dp2, , Virginia
Tue Jun 14, 2011
Please send me some info on the property from which you're thinking about walking away; I might be interested in buying it.
0 votes
Vicky Le, Agent, Cupertino, CA
Mon Jun 13, 2011
Hi Song,

It is best to consult a real estate attorney and also a CPA for any tax implications. I am a cerfitied distressed property expert so I have many experiences handling distressed properties. I would be happy to referral you to my CPA and RE Attorney that I work closely with. I never advised home owner to simply "walk away" because there are options you can explore.

Feel free to contact me for a free consultation.

Vicky Le, Realtor
Intero Real Estate Services
Certified Distressed Property Expert
Email: vle@interorealestate.com
0 votes
Frederick Ra…, Agent, Santa Clara, CA
Mon Jun 13, 2011
I would agree that you must go to a real estate attorney for advice. I will say this though. So far I haven't had one seller receive a judgement against them from a bank. The banks are overwhelmed with short sales and with their own inventory. Seventy two percent (72%) of all foreclosed properties (properties owned by the banks) have not hit the market yet. Call your attorney!!
Web Reference:  http://www.ShortSale888.com
0 votes
Andrea Wince…, Agent, Milpitas, CA
Mon Jun 13, 2011
The majority of foreclosed mortgages in California are non-recourse non-judicial, however, the best advice would be given by a competent real estate attorney, once they've had on opportunity to review all your loan documents.
0 votes
Jacob Varghe…, , San Jose, CA
Mon Jun 13, 2011
A real estate Attorney, would be the best person to answer your question.

NMLS 327086
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