Double Recourse in Calif.........Walk or??? - Loan Modification Forum

depeche · 10-19-2009, 04:34 PM

I've been reading these boards for a couple of months now and really appreciate all the advice and hearing everyone's story. We live in California and "own" a small house in the Bay Area. Our home hit a high of 520,000 in 2005 and currently is valued at $261,000. Our first mortgage has been refinanced and is $337,000 and we have a HELOC that is at $100,000. Both are recourse loans as we took out money on both. Both loans were through GMAC, but just this month our HELOC was sold to Spec. LOan Servicing. I tried to modify our first as we are very tight, but GMAC told us we were at the 31% and current so NO DEAL. They also said if we were that tight to stop paying on our CCs or car loans. We have NEVER been late on our 1st, HELOC or any loan, but we are short every month and have rung up a $35K CC debt load now. I kick myself because in 05 I knew it was time to sell because I felt Our house was over valued but I could not pull the trigger. Now we are stuck. I've been waiting to see if ANY comeback in prices is coming but in the meantime we are sinking slowly. I feel bad for even thinking about not paying the loans but I'll probably never recoup what we owe. If I quit paying I understand about the foreclosure process from reading here, BUT, what about after? Will there be judgements against us for the balance? Will I have to file a BK to be rid of it? Will I have a HUGE tax bill instead that I can't pay?? Any advice would be much appreciated.

helpinNE · 10-22-2009, 10:59 AM

DEPECHE-
I am sorry to hear of your troubles. You have some hard decisions to face. My advise to you is probably not going to be very popular or what you want to here but if I were in your shoes I would schedule an appointment with a BK attorney in your area. If the attorney tells you that you can File chapter 7 BK and wipe out all your cc debt and give the house back, this is what I would do.
The challenge for you is that the bank CAN and probably will at some point come after you for a deficency judgement after the foreclosure is complete.
If you are able to do a BK now or in the near future you should be able to wipe out all credit card and unsecured debt and give the house back to the banks, thus ending the option of them coming back after you for any deficency amount AND you will not have a big tax bill at the end of the year.
If a BK attorney tells you that your income prohibits a Chapter 7 and forces you into a chapter 13 repayment plan, you can still surrender the house back to the bank but you would end up having to pay some of the unsecured debt you have. In this instance still you would not be facing a future judgement from the bank because you are giving the house back and this should eliminate any future tax bill from a foreclosure.
I know BK scares a lot of people but your FICO is going to be shot after a foreclosure anyway and I will share a secret with you, life does go on after a BK.
Best of luck!

Chased around and around · 10-22-2009, 11:08 AM

I filled BK7 in '93, in '97 my FICO mid score was 748. It took me about 14 months or so to clean up the mess after seeing my score was 378 in '95.

If the bank has its way it will sell off your debt to collections and they will come after you. It will be considered a charge off and will haunt you til the end.

I have seen some banks and CC update your credit reports monthly to insure that your charge off will never go away on your file.

I would without a doubt consult a BK attorney. You won't need him to file the BK, but get some good advice from him. You never know, maybe by next year since we will have 4 million foreclosures this year, congress may vote in cram downs and the BK judges will help you out...

outta_here · 10-22-2009, 03:30 PM

Hi depeche - I am so sorry to hear about your situation. If you are thinking about walking away from the home and letting it go into foreclosure, with all of your other obligations and questions meeting with an attorney who can explain what your tax liabilties would be and give you guidance on your loans, since they are both recourse, might be a really good first step.

I looked up all references on the board to our mortgage holders and what people's experiences have been. There might be some guidance in previous posts on what to expect. I'm keeping my fingers crossed for you!

depeche · 10-22-2009, 09:20 PM

Thanks for the advice. I really don't want to file BK. I'm not sure how that works as far as a 7 or 13 goes, but I'm sure we make too much for a 7. Am I wrong in the thinking that even though both loans are recourse if GMAC goes non-judiciary with it that it would be wiped out without them coming back on us?

outta_here · 10-22-2009, 09:47 PM

It depends on what state you are in and what the loan language says. Some states are one action states where the mortgage holder can either foreclose or pursue you for loan amount, but not both - I am almost positive California is, but I'm not totally sure. Worst case for you would be that the first foreclosed and then the second pursued...Since you are having so many other major things happening, it would be really worth it to talk to an attorney. Have you thought about doing a short sale on the house?

depeche · 10-22-2009, 10:49 PM

I thought about a short sale, but I doubt GMAC would go for it since we are so far underwater. I'm unclear of the judicial vs non-judicial aspect of foreclosure especially regarding recorse loans. Does anyone know? I'm in California.

hope67 · 10-23-2009, 12:11 AM

Quote:

Originally Posted by depeche

I thought about a short sale, but I doubt GMAC would go for it since we are so far underwater. I'm unclear of the judicial vs non-judicial aspect of foreclosure especially regarding recorse loans. Does anyone know? I'm in California.

Your best bet is to get a FREE consultation with an attorney!

Good Luck!

outta_here · 10-23-2009, 06:48 AM

I am not sure the banks have much choice at this point - I know almost all of the homes in my nieghborhood have fallen 50% - 60%, and a lot of banks are happier to deal with the short sale process because it saves them money.

helpinNE · 10-23-2009, 08:04 AM

The challenge you face is that your loans are recourse becuase you have refied them. I would suggest you read Prof. Shay's sticky on this forum Shay's Video Presentation - California Deficiency Judgment Potential.
You could do a short sale this would limit your potential liabiality. If you go this route, make sure you have a real estate agent who knows how do to short sales and will negotiate with the banks so you do not owe them anything after all is said and done.
Even if you do not want to file BK, it is still a good idea to see an attorney in your area who is knowlegeable about Real Estate and BK to have them look over your loan docs and tell you what your options are.
Best of luck.

10-19-2009, 04:34 PM	#1 (permalink)
depeche Junior Member Join Date: Sep 2009 Posts: 3 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Double Recourse in Calif.........Walk or??? I've been reading these boards for a couple of months now and really appreciate all the advice and hearing everyone's story. We live in California and "own" a small house in the Bay Area. Our home hit a high of 520,000 in 2005 and currently is valued at $261,000. Our first mortgage has been refinanced and is $337,000 and we have a HELOC that is at $100,000. Both are recourse loans as we took out money on both. Both loans were through GMAC, but just this month our HELOC was sold to Spec. LOan Servicing. I tried to modify our first as we are very tight, but GMAC told us we were at the 31% and current so NO DEAL. They also said if we were that tight to stop paying on our CCs or car loans. We have NEVER been late on our 1st, HELOC or any loan, but we are short every month and have rung up a $35K CC debt load now. I kick myself because in 05 I knew it was time to sell because I felt Our house was over valued but I could not pull the trigger. Now we are stuck. I've been waiting to see if ANY comeback in prices is coming but in the meantime we are sinking slowly. I feel bad for even thinking about not paying the loans but I'll probably never recoup what we owe. If I quit paying I understand about the foreclosure process from reading here, BUT, what about after? Will there be judgements against us for the balance? Will I have to file a BK to be rid of it? Will I have a HUGE tax bill instead that I can't pay?? Any advice would be much appreciated.

10-22-2009, 10:59 AM	#2 (permalink)
helpinNE Senior Member Join Date: Jan 2009 Posts: 52 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Double Recourse in Calif.........Walk or??? DEPECHE- I am sorry to hear of your troubles. You have some hard decisions to face. My advise to you is probably not going to be very popular or what you want to here but if I were in your shoes I would schedule an appointment with a BK attorney in your area. If the attorney tells you that you can File chapter 7 BK and wipe out all your cc debt and give the house back, this is what I would do. The challenge for you is that the bank CAN and probably will at some point come after you for a deficency judgement after the foreclosure is complete. If you are able to do a BK now or in the near future you should be able to wipe out all credit card and unsecured debt and give the house back to the banks, thus ending the option of them coming back after you for any deficency amount AND you will not have a big tax bill at the end of the year. If a BK attorney tells you that your income prohibits a Chapter 7 and forces you into a chapter 13 repayment plan, you can still surrender the house back to the bank but you would end up having to pay some of the unsecured debt you have. In this instance still you would not be facing a future judgement from the bank because you are giving the house back and this should eliminate any future tax bill from a foreclosure. I know BK scares a lot of people but your FICO is going to be shot after a foreclosure anyway and I will share a secret with you, life does go on after a BK. Best of luck!

10-22-2009, 11:08 AM	#3 (permalink)
Chased around and around Senior Member Join Date: Jul 2009 Location: Orange County, CA Posts: 198 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Double Recourse in Calif.........Walk or??? I filled BK7 in '93, in '97 my FICO mid score was 748. It took me about 14 months or so to clean up the mess after seeing my score was 378 in '95. If the bank has its way it will sell off your debt to collections and they will come after you. It will be considered a charge off and will haunt you til the end. I have seen some banks and CC update your credit reports monthly to insure that your charge off will never go away on your file. I would without a doubt consult a BK attorney. You won't need him to file the BK, but get some good advice from him. You never know, maybe by next year since we will have 4 million foreclosures this year, congress may vote in cram downs and the BK judges will help you out...

10-22-2009, 03:30 PM	#4 (permalink)
outta_here Senior Member Join Date: Oct 2009 Posts: 30 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Double Recourse in Calif.........Walk or??? Hi depeche - I am so sorry to hear about your situation. If you are thinking about walking away from the home and letting it go into foreclosure, with all of your other obligations and questions meeting with an attorney who can explain what your tax liabilties would be and give you guidance on your loans, since they are both recourse, might be a really good first step. I looked up all references on the board to our mortgage holders and what people's experiences have been. There might be some guidance in previous posts on what to expect. I'm keeping my fingers crossed for you!

10-22-2009, 09:20 PM	#5 (permalink)
depeche Junior Member Join Date: Sep 2009 Posts: 3 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Double Recourse in Calif.........Walk or??? Thanks for the advice. I really don't want to file BK. I'm not sure how that works as far as a 7 or 13 goes, but I'm sure we make too much for a 7. Am I wrong in the thinking that even though both loans are recourse if GMAC goes non-judiciary with it that it would be wiped out without them coming back on us?

10-22-2009, 09:47 PM	#6 (permalink)
outta_here Senior Member Join Date: Oct 2009 Posts: 30 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Double Recourse in Calif.........Walk or??? It depends on what state you are in and what the loan language says. Some states are one action states where the mortgage holder can either foreclose or pursue you for loan amount, but not both - I am almost positive California is, but I'm not totally sure. Worst case for you would be that the first foreclosed and then the second pursued...Since you are having so many other major things happening, it would be really worth it to talk to an attorney. Have you thought about doing a short sale on the house?

10-22-2009, 10:49 PM	#7 (permalink)
depeche Junior Member Join Date: Sep 2009 Posts: 3 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Double Recourse in Calif.........Walk or??? I thought about a short sale, but I doubt GMAC would go for it since we are so far underwater. I'm unclear of the judicial vs non-judicial aspect of foreclosure especially regarding recorse loans. Does anyone know? I'm in California.

10-23-2009, 06:48 AM	#9 (permalink)
outta_here Senior Member Join Date: Oct 2009 Posts: 30 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Double Recourse in Calif.........Walk or??? I am not sure the banks have much choice at this point - I know almost all of the homes in my nieghborhood have fallen 50% - 60%, and a lot of banks are happier to deal with the short sale process because it saves them money.

10-23-2009, 08:04 AM	#10 (permalink)
helpinNE Senior Member Join Date: Jan 2009 Posts: 52 Nominated 0 Times in 0 Posts TOTW/F/M Award(s): 0	Re: Double Recourse in Calif.........Walk or??? The challenge you face is that your loans are recourse becuase you have refied them. I would suggest you read Prof. Shay's sticky on this forum Shay's Video Presentation - California Deficiency Judgment Potential. You could do a short sale this would limit your potential liabiality. If you go this route, make sure you have a real estate agent who knows how do to short sales and will negotiate with the banks so you do not owe them anything after all is said and done. Even if you do not want to file BK, it is still a good idea to see an attorney in your area who is knowlegeable about Real Estate and BK to have them look over your loan docs and tell you what your options are. Best of luck.

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