Almost Ready to Walk in CA

[D.Shima]

Good Evening All,

After reading many posts i'm almost certain it's time for me to go but have a few question before i do. Here is some info about my situation.

Purchased in 05 w/ CW 80/20 (Jumbo) 5yr ARM: 395k
Refi'ed in Late 06 w/ Downey Savings 5yr ARM:
410k < + Fees + 5k for home improvements
Refi'ed in Late 07 & Currently w/ BofA (ACORN):
415k + fees, 40yr fix @ 5.875, 10yr I/O, 30yr P/I

Value of my home based on the two houses for sale across the street of similar size, somewhere in the ballpark of 150k-160k.
So i'm underwater roughly by 265k. According to a blogger for the LA Times, the city i reside (Salinas, CA) is ground zero for real estate depreciation and my home is living proof of that.

Like many this is solely a business decision and to improve the quality of life for my family and i. I've been able to keep current over the years with the sacrifice of setting money aside for retirement, savings & kids college fund. I've recently taken a 10% pay decrease w/ my wife facing a 5% decrease at her job. Even with those cuts we are able to squeak by, but for what? I figured my great grand kids would never see the home reach the original purchase price when they're my age (35). The home purchase just isn't the investment it used to be.

Before i pull the trigger to walk i was hoping some of you could jump in to clarify some of my concerns.

I've read in several posts that if a person refi'ed at some point, the loan becomes recourse and they can be liable for the remainder of the debt after the sale of the home in the state of CA. Am i following this correctly? If so, then is Short Sale my best option? I was hoping to foreclose but no way in hell would i want to be liable for 260k. Thats almost double than the current market value of my house!

Also, is anyone else out there familiar or defaulted on a loan made through ACORN? I wasn't sure if there were any clauses w/ them regarding my loan that would hold me liable for any unsettled debt if i was to walk away. I'm sure it's buried somewhere in my loan agreement, but i was hoping to tap into the knowledge of the group.

I was almost certain i was going to miss this months payment to get the process started unti i started seeing "recourse" and "non-recourse" in so may posts. I have until the 16th before i'm officially late on my first payment and the anxiety to do is overwhelming to say the least. All these years tryng to do "the right thing" and what i thought was right was the biggest flop yet. Please, any and all advice would be much appreciated.

Thank you all in advance!

D

[The Professor]

While your loan is technically "recourse," your lender will undoubtedly follow the path of non-judicial foreclosure under California Civil Code Section 2924b, rather than going the judicial foreclosure route. In going in that direction, it gives up the right to seek a deficiency judgment once the non-judicial foreclosure is completed, and its sole recourse is to gain possession and dispose of the home.

The reason it will go the non-judicial foreclosure path is it is faster (4 months vs. what can potentially be a process that takes longer than a year) and you will not have a post-foreclosure right to redemption that can make the property unmarketable for up to a year after the judicial foreclosure sale.

Daniel

[D.Shima]

Thanks for the reply Prof. Shays.

In a nut shell are you saying w/ non-judicial, i have 4 months in the house without paying my mortgage vs. the long traditional drawn out foreclosure we commonly read about? Also with non-judicial am i looking at anything different from the post foreclosure procedures that a judicial foreclosure faces?

Thank you so much for all of the great information you have provided throughout this site. I've done some digging but i couldn't find an area on the site which talks about foreclosing post refinance other than the Short Sale area. If it does exist if you could post a link it would be much appreciated.

Thanks Again,

D