CA Short Sale

[aurers]

I wanted to know the legal ramifications to a short sale in CA. I've been reading different articles and blogs online and wanted to clarify the deficiency judgment law.

I purchased my condo in October 2005. I have 2 loans with Bank of America:
1st mortgage is over $467K @ 5.25% APR that adjusts next year
2nd mortgage is over $56K @ 6.75% fixed

Both loans were used to purchase 2 BR / 2 BA condo in San Mateo County. I attempted to modify my loans in March and July of this year; both times being denied because the private investor is not accepting loan modification. Bank of America has suggested to sell my home. However, the San Mateo County Assessor just sent an assessment that my property is worth $428,000. The comps are even less (avg. is $350K)

I am not worried about my credit. Even if I lose my over 800+ FICO score, I am moving my family back to my parents' home to take care of them. (My mom lost her job of over 25+ years and my father is retiring next year). But I want to make sure that B of A cannot come after my family.

Let's say I am able to see my condo at $350K.

1) What happens to the $117K not paid off on my 1st mortgage and the 2nd mortgage?

2) Will B of A be able to come back and try to get it from me?

3) Can B of A take away my 403(b) and pension? Can they touch my husband's 401(k) and my boys' 529's when they're not on the title or mortgage (I purchased the condo when I was single).

4) What are the tax ramification? Will I have to pay State and Federal taxes on this $173K? Is it better to just let the condo go into foreclosure?

5) I am working with a realtor who has successfully closed escrow on a short sale with Bank of America, but want to know if I need a real estate lawyer to protect myself and my family.

[cahomeowner]

you can do a google search on the mortgage forgiveness act which basically means you will not be taxed on the deficiency if this is your primary residence.

I will tell you though (from experience) that it can take 6 months to 1 year just to get the short sale completed despite what you may have been told. it is suppose to be better on your credit than a foreclosure or deed in lieu. not sure if that has been proven.

if you want to walk away and are behind you can also consider a deed in lieu. in the short sale approvals that I have seen it actually has language that says the bank waives their right to pursue a deficiency judgment and will issue a 1099-C. you want to make sure that language is included. the 2nd mortgage needs to include this as well.

be prepared for a lot of follow up calls, faxes, etc. Now BofA is one of those banks that have been very cooperative so you may also explore your options.