Deed in Lieu of approvd now a new promissory note

[Christine]

Hello,

I'm considering speaking to a lawyer about this but would appreciate any guidance.

I have a house in California that is in the process of being foreclosed on. The house was purchased with purchase money and was never refinanced. The house is empty, and there are no other liens on the home. The house has been on the market in the hopes of a short sale, but no offers have been received. In the mean time, I've requested a Deed-in-Lieu of and within 15 days, they've come back and said yes. This is without seeing any of my bank statements or proof of income. I only had to send them the real estate contract, a budget and a hardship letter.

The problem I have is that they said that they would need a new promissory note. She said I would owe them $8,000 interest free and take up to 5 years to pay. I asked if there was any negotiating of the amount, and her immediate answer was yes, she could go down to $6,000. Great right?. Not so fast, so then I asked if by signing the DIL, will I be released from all obligations and the bank would not come after me for a deficiency judgement? She said no and that she could not put that in the documents that she will be sending to me.

My question is, if I were to sign that promissory note, do I open myself up for a deficiency judgement once they are able to sell the home? Has anyone actually done a DIL, agreed to pay some money and had the agreement state, that the bank would not persue any other judgements? Is it just better to let the house go to foreclosure, that way I don't pay the $6,000 and they can't go after me with a deficiency judgement because of the CA law? I realize this might be worse on my credit, but I'm not really seeing the benefit of the DIL and paying $6,000. Can a lawyer work with the bank to change the wording of the contract to protect me from a future deficiency judgement? Again, I'm not sure I want to do this if it's going to cost me the $6,000 plus the lawyer fees.

[faith]

Originally Posted by Christine

Hello,

I'm considering speaking to a lawyer about this but would appreciate any guidance.

I have a house in California that is in the process of being foreclosed on. The house was purchased with purchase money and was never refinanced. The house is empty, and there are no other liens on the home. The house has been on the market in the hopes of a short sale, but no offers have been received. In the mean time, I've requested a Deed-in-Lieu of and within 15 days, they've come back and said yes. This is without seeing any of my bank statements or proof of income. I only had to send them the real estate contract, a budget and a hardship letter.

The problem I have is that they said that they would need a new promissory note. She said I would owe them $8,000 interest free and take up to 5 years to pay. I asked if there was any negotiating of the amount, and her immediate answer was yes, she could go down to $6,000. Great right?. Not so fast, so then I asked if by signing the DIL, will I be released from all obligations and the bank would not come after me for a deficiency judgement? She said no and that she could not put that in the documents that she will be sending to me.

My question is, if I were to sign that promissory note, do I open myself up for a deficiency judgement once they are able to sell the home? Has anyone actually done a DIL, agreed to pay some money and had the agreement state, that the bank would not persue any other judgements? Is it just better to let the house go to foreclosure, that way I don't pay the $6,000 and they can't go after me with a deficiency judgement because of the CA law? I realize this might be worse on my credit, but I'm not really seeing the benefit of the DIL and paying $6,000. Can a lawyer work with the bank to change the wording of the contract to protect me from a future deficiency judgement? Again, I'm not sure I want to do this if it's going to cost me the $6,000 plus the lawyer fees.

Welcome to this forum,
Do you have 1st and 2nd mortgage and have the same lender? Do you have purchase money mortgage and never refinanced. If yes , then you are covered under CA Section 580b, meaning your lender can not pursue you for any deficiency judgment. Do not sign the promissory note with a word or statement that they will not pursue any deficiency judgment against you. You have to make a tactic, like a bluff, tell then if they will not put in writing that they will not pursue any deficiency judgment against you then you will not sign the promissory note, you will have it foreclose. Tell them If they foreclose, if there is a second mortgage, the 2nd will be wiped out and if you never refinanced and has a purchase money mortgage, then you are covered under CA Section 580b.
You have to be bold, persistent and patient. They are accepting the Deed in Lieu because they will not spend a lot of money as foreclosure and short sale is.

If you waht to have a buyer make an offer in your Short Sale, you need to price it right. Go to www.zillow.com, type your address and you will see how much the price of the recent sold homes and even the current selling price. If the recent sold home is $320k, you have to price it lower than the last home sold, make it $300k to make it attractive to the buyer. Lenders accept offers within 85-90% of the fair market value.

Please click the link or copy and paste it to your browser, to find out more about deed in lieu, foreclosure and short sale.

Deed in lieu vs. forclosure

http://www.loansafe.org/forum/short-sale-outpost/

http://www.loansafe.org/forum/foreclosure-laws/

Hope this helps

[faith]

[quote=faith;104332]Welcome to this forum,
Do not sign the promissory note with a word or statement that they will not pursue any deficiency judgment against you.


I mean do not sign the prommissory note unless they put in writing that they will not pursue any deficiency judgment against you. You can actually negotiate the amount lower than what they have offerred with no interest, but demand that they have to put in writing that they will not pursue any deficiency judgment against you. Tell them you rather foreclose, and you will file for bankruptcy and you are qualified for it.

[Christine]

Thanks Faith.

No, I do not have a second mortgage on the home. It's one loan with Countrywide/B of A, purchase money mortgage never refinanced. To me, this seems like my only saving grace. If I sign the promissary note, they can come after me later.

Once I receive the documents (early next week), I will contact the representative, letting them know I can't sign the documents. I've already told her that if they don't have the clause I was looking for, I more than likely can't sign the document. Because of how quickly she was willing to drop the amount from $8k to $6k, I know there has to be more room for negotiations.

Thanks again, we'll see what they decide to do.

[faith]

Chrstine,
That's even better, you are in a good position not to sign the promissory note because you are covered under CA Section 580b which states this:

No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser.

Where both a chattel mortgage and a deed of trust or mortgage have been given to secure payment of the balance of the combined purchase price of both real and personal property, no deficiency judgment shall lie at any time under any one thereof if no deficiency judgment would lie under the deed of trust or mortgage on the real property or estate for years therein.

Your home must be your principal residence in which you and family lives. It includes the conventional single family home, condominium or cooperative, a mobile home or a duplex. If the taxpayer has more than one residence, it is the home in which the taxpayer lives most of the time.

California Section 580b states for Residential 1-4 units, Owner intends to occupy a unit in the secured real property r purchase money loan or a non recourse loan, there is NO deficiency judgment if senior or junior lienholder

California Section 580b states for non-owner occupied or other real property for a seller financed purchase money loan which is a non recourse loan there is no deficiency judgment if senior or junior lienholder

Just want you to know that I have a Successful Short Sale story with CW now BAC thank God for Moe and this forum for all the informations, email address, etc they have given us to deal with our lenders.

My CW Negotiator insisted that I have to sign a promissory note to pay the balance owed, I was firmed to my decision to say no, I am covered by CA Section 580b, I told him I rather foreclose and file for bankruptcy which I was very much qualified for, I didn't care about my credit score because I can built it up in 2-7 years. >>If I do short sale and deed in lieu it's 100-200 points and within 2 years, if I foreclose within 7 years and 300-400 points.

When the Negotiator and the investor felt like I was not going to change my mind. They gave in, the investor paid off the 2nd which is the PMI for $14k taken on the net proceeds of the sale of the house. They paid my agent 5% commission, no closing costs for me, and they have accepted the buyers extra offer of $8k to be applied to their closing costs, and a letter and email stating that they will not pursue a deficiency judgment against us, and another email which I asked regarding 1099c stating how much debt was forgiven.

>It can be done if you are persistent and don't worry about what they are going to do because CA Section 580b protects you from deficiency judgment. Just be firmed, be bold, be persistent and patient.

Take care and God bless.

[Christine]

One more question for you. Am I still covered by California 580b if I no longer live in the house? I bought it in 2004 and tried to sell in 2006 with no luck. I had to move to Washington state for work and decided to rent out the house. I did this for 2 years and since the market wasn't getting any better, I was tired of having to pay the bank $700 a month to have someone else live in the house. I have since purchased another home in Washington, 15 months ago. I'm current on this one, but want to make sure the 580b law still protects me since when I originally recieved the loan, it was for the home and it was my primary residence for 2 years.