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  1. #1
    Senior Member ProfessorShays's Avatar
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    Recourse v. Non-Recourse States

    The following article provides a summary of non-recourse mortgage states and anti-deficiency statutes. This may prove helpful for participants.

    Daniel


    List of Non-Recourse Mortgage States and Anti-Deficiency Statutes
    In a non-recourse mortgage state, borrowers are not held personally liable for more than the home’s value at the time that the loan is repaid. The lender may recoup some of its loss through foreclosure. However, the lender may not sue the borrower for additional funds. If the foreclosure sale does not generate enough money to satisfy the loan, the lender must accept the loss.

    Each non-recourse state has its own anti-deficiency statutes that prohibit lenders from seeking judgments. In a few cases, anti-deficiency statues do allow lenders to collect a limited amount of money from the borrower (such as the difference between the debt and the fair market value of the property).
    Note that in some states (such as California) non-recourse laws apply only to “purchase money” loans (i.e. original home loans that are used to purchase property). Almost all HELOCs and home equity loans are considered recourse loans and lenders for these loans may sue borrowers to recoup loss. (Except in some cases where the second mortgage lender forces the foreclosure. See: HELOC Foreclosures). There has been some speculation that mortgage refinances do not constitute “purchase money” loans. However, there have been no cases to determine this issue one way or the other.

    Anti-Deficiency / Non-Recourse States
    Alaska
    Arizona
    California
    Connecticut
    Florida
    Idaho
    Minnesota
    North Carolina
    North Dakota
    Texas
    Utah
    Washington

    One Action States
    In some states, lenders are only permitted a single lawsuit to collect mortgage debt. This plays out differently depending on the state’s laws. In New York, for example, a lender must choose between the actions of foreclosing on the property or suing to collect the debt. The following states have some type of one action statute:

    California
    Idaho
    Montana
    Nevada
    New York
    Utah

  2. #2
    Senior Member racoon's Avatar
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    Re: Recourse v. Non-Recourse States

    Prof. Shays,

    I am in NV. Does this mean if the bank does a trustee sale they will not seek a deficiency? How about the second? If a bank does a charge off on the second what are their options to collect the debt. Is wage garnishment a possibility.

    Currently I only know that the second has done a charge off and sent the balance to collections. I am debating at this point whether to go to a BK attorney. At this point, what will I lose... I already have a foreclosure and a very nice rental house to live in! Just trying to make the best of the American Nightmare.

  3. #3
    Senior Member FacingNorth's Avatar
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    Re: Recourse v. Non-Recourse States

    Quote Originally Posted by Professor Shays View Post
    There has been some speculation that mortgage refinances do not constitute €œpurchase money€ loans. However, there have been no cases to determine this issue one way or the other.
    So are lots of people currently walking away from homes in non-recourse states like AZ even if they've already refinanced their original purchase money loans? With the market I'll probably have to walk away, but I'm in the process of applying for a write down. If I get an offer, I thought I'd have to choose between doing a refi and walking away, but after reading this I'm wondering if it would be worth a gamble to do the refi and then walk if I need to down the road.

  4. #4
    Member englishharbours's Avatar
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    Re: Recourse v. Non-Recourse States

    I thought Florida was a recourse State......has this list changed since published? Thanks...

  5. #5
    Member Stuck_In_FL's Avatar
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    Re: Recourse v. Non-Recourse States

    If it IS true that FL is a non-recourse state and has anti-deficiency statues to protect borrowers as the article states, then there are a whole lot of people on this forum spreading misinformation.

  6. #6
    Member CalOwner's Avatar
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    Re: Recourse v. Non-Recourse States

    I'm curious how the one action statute works in California. Is it similar to NY in that a lender can only seek to foreclose on the property Or sue to collect the debt? Or is it that a lender is only permitted one lawsuit to collect mortgage debt?

  7. #7
    Junior Member levismom's Avatar
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    Re: Recourse v. Non-Recourse States

    I dont see the state of SC on either list? So which is it? re-course or non-recourse?

    thanks

  8. #8
    Senior Member faith's Avatar
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    Re: Recourse v. Non-Recourse States

    Quote Originally Posted by levismom View Post
    I dont see the state of SC on either list? So which is it? re-course or non-recourse?

    thanks
    Levismom,
    I've research for the answer but it's the same listing as Prof Shays has listed, it listed North Carolina as a non recourse and it doesn't include SC, so that means South Carolina is a recourse state since it does'nt show in the non recourse state listed above...

    Thanks,
    Regards,

    Faith
    "Pay it forward"

  9. #9
    Junior Member azazaz03's Avatar
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    Re: Recourse v. Non-Recourse States

    Hello,

    First of all, thank you for this wonderful website. I have found a wealth of information!
    I have read in other areas and on the HUD website that if you have an FHA insured mortgage, the government may issue a deficiency judgment even if you live in a non recourse state (I live in Arizona). We don't qualify for a loan modification because we are not at the magic number of 31%; however, with my husband's decrease in hours and lowered pay we are finding it impossible to make mortgage payments. We have used some of our savings, but still have some left (under $20,000), which I am feeling very reluctant to pour into a house that is about $70,000 below FMV. We are also current on mortgage. My questions are:
    1. If I "walk away", can HUD/FHA file a deficiency judgment against us though we live in Arizona.
    2. If they can, do they usually pursue a deficiency judgment and will they take my savings if left in the bank (or other property if I was able to purchase something).
    3. I have read that the loan servicing agency must attempt to help you keep the home and if you agree to do a short sale (and qualify for it), they will not pursue a deficiency judgment. If you don't they state that they can pursue deficiency judgment. The problem is, I don't think I would qualify for this program because I do have some savings so I have the means to pay. Are they more likely to pursue a deficiency judgment if I do not cooperate and provide financial information.
    Thank you, in advance, for the answers.

  10. #10
    Member otrora's Avatar
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    Re: Recourse v. Non-Recourse States

    Hi there....

    I've seen this website with a different list of states, and I noticed some discrepancies (for example, FL is not in this article but it is in this thread):

    List of non-recourse mortgage walkaway states

    These are all the mortgage walkaway trustee sale states, meaning they are non-judicial foreclosure states.
    In those states, generally, when they foreclose on you, they cannot pursue you for their financial losses.
    Many, such as California, do in theory allow a lender to choose judicial foreclosure but in those cases the lenders only do so if a borrower has significant other assets. This is the "one action" rule that lets the lender either pursue non-judicial foreclosure, at lower cost and less time, or judicial foreclosure that costs more money and takes more time but lets them go after you for their financial losses.
    Alaska
    Arizona
    Arkansas
    California
    Colorado
    District of Columbia (Washington DC)
    Georgia
    Hawaii
    Idaho
    Mississippi
    Missouri
    Montana (as long as non-judicial foreclosure is used)
    Nevada - note that the lender CAN get a deficiency judgment (See below)
    New Hampshire
    Oregon
    Tennessee
    Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
    Virginia
    Washington
    West Virginia
    These are states that also allow non-judicial foreclosure, and/or where non-judicial foreclosure is more common and deficiency judgments can be obtained more easily:
    Michigan
    Minnesota
    North Carolina
    Rhode Island
    South Dakota
    Utah
    Wyoming
    Am I missing something?

  11. #11
    Member otrora's Avatar
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    Re: Recourse v. Non-Recourse States

    I found this website with information that has some disparity (FL is NOT listed there, for example):

    mortgagereliefformula.com/recourse/

    These are all the mortgage walkaway trustee sale states, meaning they are non-judicial foreclosure states.
    In those states, generally, when they foreclose on you, they cannot pursue you for their financial losses.
    Many, such as California, do in theory allow a lender to choose judicial foreclosure but in those cases the lenders only do so if a borrower has significant other assets. This is the "one action" rule that lets the lender either pursue non-judicial foreclosure, at lower cost and less time, or judicial foreclosure that costs more money and takes more time but lets them go after you for their financial losses.
    Alaska
    Arizona
    Arkansas
    California
    Colorado
    District of Columbia (Washington DC)
    Georgia
    Hawaii
    Idaho
    Mississippi
    Missouri
    Montana (as long as non-judicial foreclosure is used)
    Nevada - note that the lender CAN get a deficiency judgment (See below)
    New Hampshire
    Oregon
    Tennessee
    Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
    Virginia
    Washington
    West Virginia
    These are states that also allow non-judicial foreclosure, and/or where non-judicial foreclosure is more common and deficiency judgments can be obtained more easily:
    Michigan
    Minnesota
    North Carolina
    Rhode Island
    South Dakota
    Utah
    Wyoming
    Am I missing something?

  12. #12
    Junior Member ForeBOA's Avatar
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    Re: Recourse v. Non-Recourse States

    Does non-recourse loan only apply to primary resident? I got a 100% finance from CW on my second home in California that is being foreclosure on.

    TIA

  13. #13
    Member design's Avatar
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    Re: Recourse v. Non-Recourse States

    I am having a hard time figuring out if lender can claim a deficiency judgement on me. I'm in CA, possibly looking at foreclosure as short sale and loan mod did not work. I've read in some posts that if you re-fi, a deficiency judgement is possible. I did re-fi, but what is it about a re-fi that changes things? I didn't pull money out. I had a 1st and 2nd when I bought the home and 3 years later (last year) re-fi'd both 1st and 2nd. Please help me understand! Thanks!

  14. #14
    Senior Member AZOwner's Avatar
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    Re: Recourse v. Non-Recourse States

    Quote Originally Posted by azazaz03 View Post
    Hello,

    First of all, thank you for this wonderful website. I have found a wealth of information!
    I have read in other areas and on the HUD website that if you have an FHA insured mortgage, the government may issue a deficiency judgment even if you live in a non recourse state (I live in Arizona). We don't qualify for a loan modification because we are not at the magic number of 31%; however, with my husband's decrease in hours and lowered pay we are finding it impossible to make mortgage payments. We have used some of our savings, but still have some left (under $20,000), which I am feeling very reluctant to pour into a house that is about $70,000 below FMV. We are also current on mortgage. My questions are:
    1. If I "walk away", can HUD/FHA file a deficiency judgment against us though we live in Arizona.
    2. If they can, do they usually pursue a deficiency judgment and will they take my savings if left in the bank (or other property if I was able to purchase something).
    3. I have read that the loan servicing agency must attempt to help you keep the home and if you agree to do a short sale (and qualify for it), they will not pursue a deficiency judgment. If you don't they state that they can pursue deficiency judgment. The problem is, I don't think I would qualify for this program because I do have some savings so I have the means to pay. Are they more likely to pursue a deficiency judgment if I do not cooperate and provide financial information.
    Thank you, in advance, for the answers.
    If you live in AZ
    If your mortgage (1st and 2nd (if you have a second) was 100% purchase money
    If you lived in the home as your primary residence for 6 months

    You can walk away from the home, after foreclosure, and the bank cannot pursue a default judgement, nor are you subjected to a 1099.

    If you short sale, the latest is the bank will approve, after months of waiting, maybe, and will tell you to come to the table with $$$ thousands of dollars at closing.

    The loan servicers are not obligated to assist you with staying in your home, you have to play their game, by their rules, and even then over 50% of folks are being told, sorry, you are denied.

    Thousands of people are paying months of trial payments that they could be saving to move on with their lives, and eventually being told to go-fish.

    You have to make your own individual decision, but AZ is one of the best places to be to just walk away. Pay cash for the next several years and recover.

  15. #15
    Senior Member KFish's Avatar
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    Re: Recourse v. Non-Recourse States

    It does not even have to be owner occupied for now. See updates on AZ foreclosure laws...

    Good luck to you!

  16. #16
    Member design's Avatar
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    Re: Recourse v. Non-Recourse States

    [QUOTE=AZOwner;160013]If you live in AZ
    If your mortgage (1st and 2nd (if you have a second) was 100% purchase money
    If you lived in the home as your primary residence for 6 months



    I am in CA but can you please help me understand "100% purchase money". When I bought the home, I had a 1st and 2nd. I re-financed 3 years later (both the 1st and 2nd). No money was taken out, no HELOC, just re-fi'd. Does this quaify me for 100% purchase money in both cases...and as a result, a dificiency judgement cannot be pursued. Please help.

  17. #17
    Senior Member KFish's Avatar
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    Re: Recourse v. Non-Recourse States

    The AZ ones have changed (they briefly changed them, but it was overturned by the governor) They do not have to be owner occupied to qualify for non-deficiency.

    I would think if you did not take out any money, it would qualify, but am not sure. I only spoke to a real estate attorney in AZ, not CA. But I am sure someone here will answer you about that

  18. #18
    Senior Member AZOwner's Avatar
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    Re: Recourse v. Non-Recourse States

    [QUOTE=design;160969]
    Quote Originally Posted by AZOwner View Post
    If you live in AZ
    If your mortgage (1st and 2nd (if you have a second) was 100% purchase money
    If you lived in the home as your primary residence for 6 months



    I am in CA but can you please help me understand "100% purchase money". When I bought the home, I had a 1st and 2nd. I re-financed 3 years later (both the 1st and 2nd). No money was taken out, no HELOC, just re-fi'd. Does this quaify me for 100% purchase money in both cases...and as a result, a dificiency judgement cannot be pursued. Please help.
    100% Purchase Money -- or in other words you received no cash. 100% of your loan was to refinance your house -- period end of story.

    I don't know about the judgements in CA. Go to new friends chat thread, give a shout to ******** and ask her to explain CA rules. . . she would know.

  19. #19
    Member quwan1965's Avatar
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    Re: Recourse v. Non-Recourse States

    Recourse v. Non-Recourse States The above stated that Alaska ia a non-recourse state but after reviewing Alaska law it look like if you mortgage company choose to do a judicial foreclosure they can . what is this based on and come can I find out which one they can do.

    thanks Quwan

  20. #20
    Senior Member Enough Already's Avatar
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    Re: Recourse v. Non-Recourse States

    Moe,
    I'm not sure how accurate this list is. Florida is a recourse state, but it's listed above as non-recourse. It looks like this list needs to updated.

    EA

  21. #21
    Senior Member vkswede's Avatar
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    Re: Recourse v. Non-Recourse States

    Hi,

    I hope you got an answer for your question , because I'm in same situation in CA. I just got the 1099A from CW which says the borrower is not liable for the debt. The only think is the 2nd which was refied to lower rate no cash out 60K. I do not know whats going to happen with that?




    Quote Originally Posted by design View Post
    I am having a hard time figuring out if lender can claim a deficiency judgement on me. I'm in CA, possibly looking at foreclosure as short sale and loan mod did not work. I've read in some posts that if you re-fi, a deficiency judgement is possible. I did re-fi, but what is it about a re-fi that changes things? I didn't pull money out. I had a 1st and 2nd when I bought the home and 3 years later (last year) re-fi'd both 1st and 2nd. Please help me understand! Thanks!

  22. #22
    Senior Member mrange25's Avatar
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    Re: Recourse v. Non-Recourse States

    Does a non-judicial foreclosure automatically mean they don't persue deficiency judgements?

  23. #23
    Junior Member tedena's Avatar
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    Re: Recourse v. Non-Recourse States

    I'm in Fl and I'm lucky I qualified for a modification however it's not that much of a "relief" b/c there will be a balloon payment at the end. If I accept the terms of a modification can I still walk away and not have to pay for the deficiency?

    Quote Originally Posted by The Professor View Post
    The following article provides a summary of non-recourse mortgage states and anti-deficiency statutes. This may prove helpful for participants.

    Daniel


    List of Non-Recourse Mortgage States and Anti-Deficiency Statutes
    In a non-recourse mortgage state, borrowers are not held personally liable for more than the homes value at the time that the loan is repaid. The lender may recoup some of its loss through foreclosure. However, the lender may not sue the borrower for additional funds. If the foreclosure sale does not generate enough money to satisfy the loan, the lender must accept the loss.

    Each non-recourse state has its own anti-deficiency statutes that prohibit lenders from seeking judgments. In a few cases, anti-deficiency statues do allow lenders to collect a limited amount of money from the borrower (such as the difference between the debt and the fair market value of the property).
    Note that in some states (such as California) non-recourse laws apply only to purchase money loans (i.e. original home loans that are used to purchase property). Almost all HELOCs and home equity loans are considered recourse loans and lenders for these loans may sue borrowers to recoup loss. (Except in some cases where the second mortgage lender forces the foreclosure. See: HELOC Foreclosures). There has been some speculation that mortgage refinances do not constitute purchase money loans. However, there have been no cases to determine this issue one way or the other.

    Anti-Deficiency / Non-Recourse States
    Alaska
    Arizona
    California
    Connecticut
    Florida
    Idaho
    Minnesota
    North Carolina
    North Dakota
    Texas
    Utah
    Washington

    One Action States
    In some states, lenders are only permitted a single lawsuit to collect mortgage debt. This plays out differently depending on the states laws. In New York, for example, a lender must choose between the actions of foreclosing on the property or suing to collect the debt. The following states have some type of one action statute:

    California
    Idaho
    Montana
    Nevada
    New York
    Utah

  24. #24
    Junior Member tedena's Avatar
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    Re: Recourse v. Non-Recourse States

    I'm in Fl and I'm lucky I qualified for a modification however it's not that much of a "relief" b/c there will be a balloon payment at the end. If I accept the terms of a modification can I still walk away and not have to pay for the deficiency

  25. #25
    Junior Member tedena's Avatar
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    Re: Recourse v. Non-Recourse States

    I'm in Fl and I'm lucky I qualified for a modification however it's not that much of a "relief" b/c there will be a balloon payment at the end. If I accept the terms of a modification can I still walk away and not have to pay for the deficiency

  26. #26
    Member TeresaDLT's Avatar
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    Re: Recourse v. Non-Recourse States

    hello-

    i have an 80/20 loan (non-recourse) that has been through 1 modification already but is in default on both and in preforeclosure phase....since I modified once, is that considered a refinance and does that make this a recourse loan? Confused,hope someone can clarify..

  27. #27
    Member JackDinLBC's Avatar
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    Re: Recourse v. Non-Recourse States

    I sold my California condo in a negotiated short sale last year, 2009. I originally purchased it in 2005 with an 80/20 loan. The 20 being a HELOC but never refinanced.

    From what I've read I should have received a 1099-A because CA is a non-recourse state. The lender would have taken the proceeds from the short sale and taken a loss on the remaining debt.

    Instead I got a 1099-C on both loans. Is the bank in error?

    This is a critical tax issue in CA where the state does not recognize the federal Homeowner's Relief Act.

  28. #28
    Member Harveston99's Avatar
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    Re: Recourse v. Non-Recourse States

    I am in foreclosure in CA.

    I have a 1st and 2nd that were both used to purchase the townhouse. These are non-recourse loans.

    However, something is going on where the seconds are not participating in the actual foreclosure and winning judgements for the full amount of the loan......even on non-recourse seconds.

    How is this possible with the CA Laws?

    Anyone else facing this.

    An attorney I spoke to said I will either have to pay the $80,000 debt that has already been sold to a Collections Agency or file BK now.

    If I had known this I would have filed Chap 13 18-months ago and kept my house. Now I lost my home and will still have to file BK.

  29. #29
    Senior Member pookey's Avatar
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    Re: Recourse v. Non-Recourse States

    Quote Originally Posted by JackDinLBC View Post
    I sold my California condo in a negotiated short sale last year, 2009. I originally purchased it in 2005 with an 80/20 loan. The 20 being a HELOC but never refinanced.

    From what I've read I should have received a 1099-A because CA is a non-recourse state. The lender would have taken the proceeds from the short sale and taken a loss on the remaining debt.

    Instead I got a 1099-C on both loans. Is the bank in error?

    This is a critical tax issue in CA where the state does not recognize the federal Homeowner's Relief Act.
    You're discovering why foreclosure is sometimes a better option than a short sale. The non-recourse laws pertain only when a house is foreclosed upon. A short sale is a negotiated sale with the bank and the 2nd or HELOC becomes an unsecured debt, just like a credit card. I'm really sorry to say they are correct in giving you the 1099-C's. I'm actually surprised the 2nd did that instead of trying to collect on the debt.

    Talk to an accountant to make sure you understand your tax situation.

  30. #30
    Senior Member FacingNorth's Avatar
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    Exclamation Re: Recourse v. Non-Recourse States

    Wow, the last 2 comments are scary. JackDinLBC, maybe it's due to your 2nd being a HELOC instead of purchase money?

    Harveston99, so both of your loans are purchase money; did you also have an equity loan at some point or did you refinance either loan? Is the condo your primary residence? What exactly did your attorney have to say about why you are on the hook for the 2nd in a non-recourse state? Are 2nd lenders doing this only in CA now, or also in other states?

  31. #31
    Senior Member pookey's Avatar
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    Re: Recourse v. Non-Recourse States

    Quote Originally Posted by Harveston99 View Post
    I am in foreclosure in CA.

    I have a 1st and 2nd that were both used to purchase the townhouse. These are non-recourse loans.

    However, something is going on where the seconds are not participating in the actual foreclosure and winning judgements for the full amount of the loan......even on non-recourse seconds.

    How is this possible with the CA Laws?

    Anyone else facing this.

    An attorney I spoke to said I will either have to pay the $80,000 debt that has already been sold to a Collections Agency or file BK now.

    If I had known this I would have filed Chap 13 18-months ago and kept my house. Now I lost my home and will still have to file BK.
    Where have you seen "something is going on" about this? I'd get another attorney, fast, because it's absolutely not right in a foreclosure of non-recourse debt that the 2nd/HELOC can ever come after you. They might try unknowingly, but a letter from you or a lawyer pointing out the non-recourse nature should put that to rest quickly.

  32. #32
    Member Harveston99's Avatar
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    Re: Recourse v. Non-Recourse States

    Yes, both loans are the original loans. No refinance, no other loans take. Primary (only) residence.

    I have had friends get judgements against them on non-recourse loans in CA in the last few months. Perhaps there was something they did not want to tell me about their particular cases.

    The attorney I spoke to said this is a new trend. I contacted a second attorney and she told me the same thing....the seconds have found a loop-hole to come after people on the non-recourse seconds. Both advised BK.

    Regarding Short Sale.....

    Do I understand correctly that if I just let it Foreclose I have a better chance at fighting the second mortgage if they come after me?

    If I get the Short Sale the second does become a recourse loan?

    Again, the same attorney told me there was no difference between Short Sale and Foreclosure when it comes to the second or tax issues.

    Sounds like I found a bad attorney. No wonder he wasn't able to get my loans modified either.

    Thanks for the information. I look forward to understanding this issue more.

  33. #33
    Senior Member FacingNorth's Avatar
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    Question Re: Recourse v. Non-Recourse States

    Quote Originally Posted by pookey View Post
    You're discovering why foreclosure is sometimes a better option than a short sale. The non-recourse laws pertain only when a house is foreclosed upon. A short sale is a negotiated sale with the bank and the 2nd or HELOC becomes an unsecured debt, just like a credit card. I'm really sorry to say they are correct in giving you the 1099-C's. I'm actually surprised the 2nd did that instead of trying to collect on the debt.

    Talk to an accountant to make sure you understand your tax situation.
    So to avoid the 2nd creating issues by turning to an unsecured debt, you'd want to negotiate with the 2nd for 5% of the loan or whatever, and make sure that they put it in writing that the debt is settled, correct?

    I'm not clear on the difference between 1099-A and 1099-C when it comes to short sales and foreclosures. If a 1099-C means that you owe taxes on the difference, then wouldn't that be negated (until 2012 rolls around) by the Tax Relief Act?

  34. #34
    Member Harveston99's Avatar
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    Re: Recourse v. Non-Recourse States

    I just reviewed my notes from the meeting from the first attorney.

    I forgot this part.....he said that if the second does not participate in the Foreclosure they prevent the loan from becoming non-recourse. That is how they are able to get judgements against the borrower after a Foreclosure.

    Has anyone heard of this?

  35. #35
    Senior Member FacingNorth's Avatar
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    Re: Recourse v. Non-Recourse States

    bump, anyone else heard of this?

  36. #36
    Senior Member pookey's Avatar
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    Re: Recourse v. Non-Recourse States

    Quote Originally Posted by Harveston99 View Post
    I just reviewed my notes from the meeting from the first attorney.

    I forgot this part.....he said that if the second does not participate in the Foreclosure they prevent the loan from becoming non-recourse. That is how they are able to get judgements against the borrower after a Foreclosure.

    Has anyone heard of this?
    Well, the second doesn't get to participate in the foreclosure because they are in second position. If the first chooses to foreclose and there is no money left for the second it becomes an unsecured loan. HOWEVER, it is still a purchase money loan and non-recourse. Changing it to an unsecured position doesn't change that.

    The only way it could be pursued is if it had been refinanced or was not part of the purchase money (in CA). If it went to court the judge would have to throw it out - I guess it doesn't mean they can't try, hoping you won't know any better, but all you'd have to do is file a lawsuit.

    This is just based on my understanding of the law - I am not a lawyer, but CA law is pretty clear on this.

  37. #37
    Senior Member HopefulinSeattle's Avatar
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    Re: Recourse v. Non-Recourse States

    Washington State Question

    Non-Recourse State

    I have a first mt with BOA, and the 2nd mtg is with GMAC and it is a HELOC and not a purchase money mortgage. We got the HELOC several years afer purchasing the home to do some improvements.

    Prior to reading all of the forum posts, it was always my understanding that the 2nd would have no recourse for deficiency judgment if the property goes to auction. Isn't that the case? The posts on this site show otherwise - 2nd lien holders turning it into unsecured debt and then coming after you.

    Also, if we are lucky enough to negotiate a settlement from them, how do we protect ourselves from further reccourse/deficiency judgments?

    We are current on our loans; however, we are going to stop paying this month and I am gathering all of the facts so we can make the best decisions possible - foreclosure, short sale, settlement of 2nd and loan mod for first mtg....etc.

    I am going to pull all of my original loan documents to review them. Would the language for the 2nd include "recourse" or "non-recourse?" If so, doesn't Washington State foreclosure law trump the note?

    Finally, how does the Federal Debt Relief Act factor in on my situation?

    Thanks for all of your help. I have scoured this site for days and I feel much better about "starting" this process.

  38. #38
    Senior Member Arizonan's Avatar
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    Re: Recourse v. Non-Recourse States

    If anyone gets definitive info. on this from an attorney, please remember to come back and update what you found out.

  39. #39
    Junior Member steelbreeze's Avatar
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    Re: Recourse v. Non-Recourse States

    What a great place...thanks for the advice...ok here is my mess..

    I live in NC. I bought at the peak, 2006, and we are now somewhere n the neighborhood of 40% (75k) underwater with the note(195K). The job market forced us to make a change, which is forcing us to move. I tried to get a refi with on the obama plan and combine my 2 notes, and then rent. Wont happen since values are plummeting in my area. last home on our street sold for 125k, our was appraised at 220k in Late 2006....

    I have 2 mortgages, 1 primary from usbank (175,000) and a second we got later for about 22k. US Bank is not know (from what i am reading) to be nice about modifying loans and i am worried about setting off alarms on their side.

    I have a few months, but not alot of time. I want to be responsible, but i really dont see anything to do except walk away from it. I have perfect 800+ credit and dont want this at all,but i can afford a 150 pt hit and ill survive.

    Questions-
    1- if we split, how does the new NC deficiency law protect us? And does it have to be a foreclosure?

    2- Do we stop payments before we leave? We have 3-6 months before we have to move.

    3- any other recommendations? I am at the end of my rope. I have 9 foreclosures in my neighborhood of about 50 homes and values are plummeting daily.

    Also any credit salvaging recommendations are welcome. I was told by a co-worker that i would be better off running everything through the roof, bail on house and then move and file bankruptcy. If i am going to be punished the same way even though i am not trying to stick them it would be good to know.

    Thanks again folks..this place is awesome and any help for a desperate North Carolinian would be greatly appreciated by me and my family!

    Thank!

    Rob

  40. #40
    Senior Member Bella's Avatar
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    Re: Recourse v. Non-Recourse States

    Quote Originally Posted by steelbreeze View Post
    What a great place...thanks for the advice...ok here is my mess..

    I live in NC. I bought at the peak, 2006, and we are now somewhere n the neighborhood of 40% (75k) underwater with the note(195K). The job market forced us to make a change, which is forcing us to move. I tried to get a refi with on the obama plan and combine my 2 notes, and then rent. Wont happen since values are plummeting in my area. last home on our street sold for 125k, our was appraised at 220k in Late 2006....

    I have 2 mortgages, 1 primary from usbank (175,000) and a second we got later for about 22k. US Bank is not know (from what i am reading) to be nice about modifying loans and i am worried about setting off alarms on their side.

    I have a few months, but not alot of time. I want to be responsible, but i really dont see anything to do except walk away from it. I have perfect 800+ credit and dont want this at all,but i can afford a 150 pt hit and ill survive.

    Questions-
    1- if we split, how does the new NC deficiency law protect us? And does it have to be a foreclosure?

    2- Do we stop payments before we leave? We have 3-6 months before we have to move.

    3- any other recommendations? I am at the end of my rope. I have 9 foreclosures in my neighborhood of about 50 homes and values are plummeting daily.

    Also any credit salvaging recommendations are welcome. I was told by a co-worker that i would be better off running everything through the roof, bail on house and then move and file bankruptcy. If i am going to be punished the same way even though i am not trying to stick them it would be good to know.

    Thanks again folks..this place is awesome and any help for a desperate North Carolinian would be greatly appreciated by me and my family!

    Thank!

    Rob

    Welcome, for a quicker response, I would suggest you copy and paste your post above here:

    Deed in Lieu of Foreclosure - Do You Need Help to Walk Away? - Mortgage Forum - LoanSafe.org

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