Ready to walk; foreclosing in California...

[BlueOvalFan]

Alright folks, I’ve done more than my fair share of reading posts on this site, searching the internet and have even met with an attorneyto discuss the particulars of foreclosing on my home. However, I’m scared to death of the possibility of a judicial foreclosure.

Just looking for some additional advice from those who have similar situations as myself or just in the know. Here are the facts…

My wife lost her job this month (which we knew was coming) and had a baby last year as a result we can no longer pay our mortgage. We’re currently applying for a loan mod, but that’s a separate thread.
I live in California and occupy a single family home whichis my primary residence. I have twoloans (80/15); $279K balance on the 1st mortgage with Wells Fargo (purchasemoney/Non-Recourse) and the second with USAA (refi/recourse) for $50K. The property is worth about $200K at best.

We’re 60 days late and nearing 90 days on the 16^thof this month on both loans. I’ve received an acceleration notice a few weeksago from WF and have been advised if I want a shot at a loan mod I need to be no delinquent than 60 days.

My question is simply; since the first (WF) is a purchase money loan and will probable pursue a non-judicial foreclosure (power of sale) how likely would it be for the second to step in to stop the process.
Is it likely/possible the Second will cure the Wells Fargo arrears and charge me for it (otherwise, Wells Fargo will foreclose, thereby extinguishing Second Place's second deed of trust). If I fail to pay SecondPlace for its "service" of curing the Wells Fargo arrears or become current with them as well, will/can USAA pursue a judicial-foreclose on the second deed, then payoff the first and then come after me for the entire deficiency balance.

I do have two other rental properties and have a combinede quity of about $140K. The area I’m in is glutted with foreclosure making theirsale not possible at what should be fair market value.

Any advice would be appreciated…

[FeelingFree]

BOF,

I think your right on track assuming a non-judicial foreclosure is the course of action for WF bank. I highly doubt, and I have not see precedent yet, an underwater second, especially as underwater as USAA is in your case, is going to payoff your first and then chase you for the deficiency balance. Banks know you still hold all the cards with a chapter 7 filing that will wipe them out completely.

It is more likely your first, non-recourse loan, will foreclose non-judicially and then the second could probably then charge off their loss and sell the account to a third party collection agency. This scenario is happening with Underwater in Vallejo right now. Look up his thread.

I went through a non-judicail FC with Wells Fargo and had a 125K second with I think BoA for my in-laws. Never heard from the second again.

FF

[dg0129]

Its probably too late for this, but if you quit paying the 2nd and keep the 1st current then when the 2nd forecloses aren't you covered by the single action rule? Meaning if you have a recourse 2nd, but your force the 2nd only to foreclose while keeping the 1st current aren't you then fully covered?

[jayguy0710]

Its probably too late for this, but if you quit paying the 2nd and keep the 1st current then when the 2nd forecloses aren't you covered by the single action rule? Meaning if you have a recourse 2nd, but your force the 2nd only to foreclose while keeping the 1st current aren't you then fully covered?

The second loan wouldn't foreclose, they'd have to pay off the 1st lien do to that. Which they wouldn't do because they are 100% underwater - it's like paying $10 to have the right to get $6 - not smart.

What I would, BlueOval, is stop paying everything, and read the "HAMPster Wheel" thread. Save every dime that you would have paid in the mortgage (and taxes) and keep that money ready for a settlement. When the 1st finally forecloses, hopefully after 18 months if you play the game right, you'll have a lot of money saved up. The 1st cannot pursue you for a deficiency, the 2nd might - only very recently have we heard of a SOJ pursuing a borrower. Keep in mind that SOJ's suing is still very much the minority outcome. If they do decide to, you'll have a boatload of cash which to settle - see the "Strategy for Settling" thread. Read both of those threads in their entirety and you should be in good shape. Your 2nd is "only" $50K - and it costs a lot of money to pursue borrowers (legal fees), so it might not be worth it for USAA. Time will only tell, but as FeelingFree mentioned above, read Underwater_Vallejo's story and keep following it for updated. His situation could be very similar to yours ...

[BlueOvalFan]

I'm confused by some people's posto n these boards, they seemingly give bad advice or miss information when and how a bank can foreclose in California if you have a non-recourse loan.

So, I have what is seemingly a stupid question and want to make sure I fully understand California laws in regards to non-recourse loans and foreclosure.

1. If your loan is purchase money (non-recourse) the bank can NEVER EVER come after you by means of a judicial foreclosure nor can they seek a deficiency balance. Their only course of action is a non-judicial foreclosure and will take possession of the property and you are free from any other action by the bank as specified by California's "one action rule"

Do I have this right...?

[BlueOvalFan]

anyone...............................?

[TomEason]

I'm confused by some people's posto n these boards, they seemingly give bad advice or miss information when and how a bank can foreclose in California if you have a non-recourse loan.

So, I have what is seemingly a stupid question and want to make sure I fully understand California laws in regards to non-recourse loans and foreclosure.

1. If your loan is purchase money (non-recourse) the bank can NEVER EVER come after you by means of a judicial foreclosure nor can they seek a deficiency balance. Their only course of action is a non-judicial foreclosure and will take possession of the property and you are free from any other action by the bank as specified by California's "one action rule" Do I have this right...?

BlueOvalFan
You're correct, but the protection afforded under Cal CCP Section 580(b) is even greater than that contained in your statement. If the loan is purchase money non-recourse, the lender can never seek a deficiency judgment, even if that lender were stupid enough to conduct a judicial foreclosure, which as you know, never happens for small residential property loans in CA. So, you almost had it right, and for the sake of practical application, yes you had it right. But the Cal CCP Section 726 "one action rule" is not relevant here. You can easily read these statutes on the internet.