Purchase money loan modified...is it now a recourse loan?

[shannonek]

I'm sure this question has been asked, but here goes...

I modified my 1st and 2nd (80/20) 100% purchase money loan in March of 2008. My subprime interest only arm had reset and CW froze my initial rate for 5 years but now it includes principal. I am now considering walking away because of a 40-50% decrease in value. I would love to get a principle reduction and remain in my home.

My question is this...Am I now in a recourse loan?

[Moe Bedard]

My understanding is maybe. Here is an exchange with the lawyers in Cali on this.

Will a Mod turn a non-recourse into a recourse loan?

The challenge is that the ability of a lender to pursue a borrower for any deficiencies is not just a matter of what state they are in, or even what the modification documents may state. California for example has a fairly complex web of anti-deficiency statutes. There is case law that actually says that if the borrower resides in CA, even if the property is located elsewhere, then the CA statutes apply. As to modifications, the short answer is that yes, they can change an otherwise "non-recourse" loan into a "recourse" loan, but again, there are several moving pieces. It is really important to get as much of a custom answer as possible as one small detail can make all the difference.

[shannonek]

Hi Moe,

Remember me....I was #27 to get a loan modification...I think! Boy have things changed.

I checked my mod docs and I don't see anything that states loan is now recourse...but I'm not legally savey...they may have been sneaky with the wording.

Thanks for the reply,

Shannon