Purchase Money Loan & Loan Mod

[rockraider3]

Sorry if this has been discussed before. I tried to use the search function but couldn't get it to work properly for some reason...

This is for a California property, if that makes a difference.

I have a home in foreclosure and am trying to decide what to do about it. There's a VERY long story here, but the short version is that the home has a water problem and floods during the winter from ground water from the neighbor's property. I took the neighbor to court, and they are required to fix the problem. But I know there is no guarantee that whatever fix the neighbor does will work... this is a difficult problem to remedy. But I am hopeful that it can be corrected.

However, because of the uncertainty of IF the fix will actually work (both short term and long term), I want to tread very carefully and keep my options open for walking away from the property, if necessary.

Currently I have a purchase money mortgage, i.e. non-recourse. And I want to keep that leverage, in case this issue cannot be fixed.

But to keep the property, I would need a loan modification as well. Not sure what Wells Fargo is willing to do for me... but preferably a write-down of the loan to FMV and a rate reduction. Though, I could probably just work with a rate reduction, if that's all they offered.

Now this is my question: To keep this property I need to keep both the non-recourse nature of the loan AND have the loan modified to some extent, is this possible? Does a loan modification negate the purchase money status of a mortgage loan?

Or is this something I just have to negotiate as part of the modification? Any help here is greatly appreciated.

[Moe Bedard]

A purchase money loan which in California is a non-recourse loan then the loan does remain a purchase loan. However, the loan itselft does change and typically the lender's are having borrowers sign away legal rights to the original loan as well as a personal guarantee on the new modified loan.

Therefore, it is wise for a borrower to have some type of legal representation to look over the loan docs. There are some FREE resources like the local HUD office that a borrower can go and get some assistance.

I do not believe that a borrower should sign a loan modification agreement directly with their lender without legal assistance.