Looking for clarification--short sale on investment property

[CaliforniaDreamin]

I may already know the answer to this, based upon my detailed readings of many posts here over the past couple weeks, but I'd like confirmation, thoughts, and perhaps some advice.

I purchased an investment property in the California foothills in May 2007. Purchase price $300K. First mortgage for $240K, 10-year interest only at 6% with CitiMortgage (Investor is Freddie Mac). Second mortgage for $30K at 8.25% P&I with Chase.

Due to a variety of factors that I will not bore you with, none of which would really be considered hardships, I have come to the conclusion that keeping this property is not possible. Keeping the property would seriously jeopardize our ability to stay in our first home.

That brings me to the possibility of a short sale. I spoke to Citi, and their specialist essentially said that was my only real option. I may try to modify, but that is really only delaying the inevitable. My best guestimate of FMV on the short sale is $200K.

If this short sale were approved in this scenario, I believe that Chase will file a judgement in an attempt to get their $30K back. While both loans were purchase money, in that they were the original loans used for purchase, they are not "purchase money" in the legal sense, correct? Thus I am subject to a potential judgement from Chase.

My primary residence is also in California, and also underwater, though I can afford it for the foreseeable future. I also own an unimproved lot which is unencumbered. FMV on the lot is just about impossible to determine, as it was on the market for the last 2 years with no activity.
My question here is whether or not Chase can place a lien on the unimproved lot or any of my other assets (pension, retirement fund, vehicles)?

I will be seeking professional legal council, but wanted to bounce this off a few of the pros who check in here. Thanks in advance!

[The Professor]

Fortunately the amount owed Chase is not as large as many of the seconds we see in this forum. My sense is the appropriate thing to do is to see if you can follow a short sale path for your investment property. The benefit to you is that even if Chase accepts a relatively nominal settlement to agree to cooperate in a short sale, that amount will reduce the balance you will owe to Chase. In conjunction with the short sale, Chase will want you to sign a personal not for any remaining balance that is owed would be my suspicion.

Chase cannot lien your other real property without either resorting to a pre-judgment attachment (unlikely) or waiting until they have obtained a judgment against you after filing an successfully concluding a lawsuit (more likely). So I wouldn't worry too much about them filing a lien against you in an immediate timeframe.

Take care,

Daniel

[CaliforniaDreamin]

Thanks Professor for the quick response. I have to assume that if Chase agrees to go along with the short sale, and I can negotiate an amount that will satisfy both of us, that they will not be able to come after me or any of my assets at a later date? That is, of course, assuming that I comply with the terms of the personal note signed prior to short sale. Thanks again. I echo the comments of others here that it is nice to have a voice out there to bounce these things off.

[CaliforniaDreamin]

I guess to more clearly state my question, "Assuming I agree to a note with Chase prior to short sale, and comply with whatever conditions we agree upon, can they file any other judgements in an effort to obtain the entire amount?" Thanks!

[The Professor]

if a new note is created, it substitutes for the old terms of the debt. So long as you are current on its terms, there would be no basis for filing a lawsuit.

Daniel