Still "purchase money" if I rent during foreclosure?

[Behyeh]

Hello all,

Will we still be protected from deficiency judgements under the Purchase Money loan if we rent out our place during the foreclosure? Or would this be nullified since it proves we don't live there anymore? As I understand it, in order to be protected, we have to have not refi'd and also have to live there.

Thank you in advance.

[Evan Bedard]

Hello all,

Will we still be protected from deficiency judgements under the Purchase Money loan if we rent out our place during the foreclosure? Or would this be nullified since it proves we don't live there anymore? As I understand it, in order to be protected, we have to have not refi'd and also have to live there.

Thank you in advance.

Welcome and thanks for joining the forum.

Your mortgage(s) will still be considered purchase money loans even if you move out of the property and rent it out. This should not increases the chances of the lender pursuing a judgement and it will really depend on state foreclosure laws whether or not they are able to do so. What state is the property located in?

[Behyeh]

I'm sorry, I guess the state would have helped. We are in California.

[Behyeh]

With regard to our plan to purchase first, then foreclose... As I understand from our research thus far, we should be protected from taxes based on insolvency. (I've already done an insolvency worksheet to see where we'd stand). So what we're concerned with, is the deficiency judgement possibility in California.

We have a condo and it seems as though deficiency judgements are usually reserved for commercial properties (according to what we've read). Is there anything else we should be worried about?

[Evan Bedard]

With regard to our plan to purchase first, then foreclose... As I understand from our research thus far, we should be protected from taxes based on insolvency. (I've already done an insolvency worksheet to see where we'd stand). So what we're concerned with, is the deficiency judgement possibility in California.

We have a condo and it seems as though deficiency judgements are usually reserved for commercial properties (according to what we've read). Is there anything else we should be worried about?

You have nothing to worry about as far as a deficiency judgement goes here in CA especially since both loans are purchase money.

[Behyeh]

How do I get past the part of California Code of Civil procedure section 580b: "...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..."

Since I started out living in the condo before we rent it out, does that cover the "in part" portion?

[Evan Bedard]

This basically just means you obtained the mortgage(s) solely to cover the purchase price of the property.

[Behyeh]

Thank you so much for helping put our minds at ease. It's been a stressful decision, but sounds like all the questions are being answered with positive results.

[Evan Bedard]

No problem and I'm so glad I and others are able to help. Please feel free to join in on other discussions as well as many members here are in the same position as yourself.