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1st time poster, but I've been reading along silently for awhile and will start with a thank you for all the good information!!!
I live in Corona, CA where my home is underwater by ~74K but my job has moved to Huntington Beach which is a dreadful commute through some of the worst traffic in the country, plus I have a medical issue that makes it painful and humiliating - I end up sitting on a doughnut due to tailbone pain. So, I'm evaluating my options and need to decide ASAP.
If I decide to stop paying and short sell, there is always the possibility of forclosure so I'm looking at what's the worst case scenario...and can I live with it.
My home was bought in 2004 and I refi'd in 2008 to combine my 1st and 2nd (no cash out). But from reading around it seems it would still be deemed a recourse loan due to the refi. If someone has better info please correct me...looking through my loan paperwork, but haven't found any indicator yet. Wish I knew better where to look! So if it goes to forclosure there are two types judicial and non-judicial. I've been told non-judicial is the almost always the case and in that case for a recourse loan I am not liable for the deficiency. In the judicial case I could be sued afterward for the deficiency. In both cases, I'd pay taxes on the deficiency. I'm not sure if the Mortgage forgivness act applies to forclosures and short payoffs or just to short sales, but it's likely not to be renewed and I should prepare for the liklihood of taxes.
I'm wondering what the likelihood of a judicial forclosure is for me - I do have assets to cover the deficiency due to an inheritance after buying the property and will have to disclose that as part of the short sale package. Are the judicial uncommon because it's more expensive than what they hope to regain?
So in my case, where they could potentially recoupe 74k and they know I have the assets would it still not be worth the time and effort of a judicial forclosure? It's hard to stomach losing what my dad worked his whole life to give to me because of this situation.
Repliers: please state your qualifications when you reply so I can weigh the input I'm receiving. Also, please correct me if I am misinformed on anything!!
1. Your loan becomes a recourse loan with a refinance
2. Your loan would still qualify for mortgage and forgiveness act in event of short sell or foreclosure since you did not cash out
If you have a hardship condition (divorce, loss of job, reall medical illness (stroke, terminal cancel). Sorry to bust your bubble but sitting in traffic in Southern California does not qualify as real medical hardship despite your back pain. That is unless you can find a qualified medical provider to document you back pain prevents you from working or traveling long distances.
But you potentially can qualify for a short sell/home goes into foreclosure, you can get 1099 cancelation of debt waive of taxes owed waived 100%.
Lenders can either go after your assets because of the refinance (that made loan recourse) if they have knowledge that you can still afford to pay your mortgage. Most lenders do not pursue deficiency judgments.
Thanks anftp,
Your feedback matches what I understood, but I can't count on mortgage debt relief act (MDRA) to be around. I was concerned about not qualifying for a hardship, but spoke to a short sale expert who felt it was valid and that there is no need for me to be an indentured servant to my house (renting at a loss for 7-8 years waiting to not be underwater for what I owe at THAT time). Short sale experts only make money if they successfully complete a short sale, right? My back pain may keep me from working, but certainly that combined with the stress of all of this is effecting my work and with cutbacks happening ... I am concerned. That said, my income has not changed at this point.
One thing about your post confuses me, if my situation doesn't qualify for a hardship then how would I potentially qualify for a shortsale? Also, from what I read (and perhaps it's wrong) because the loan is recourse there is still taxes on the deficiency if MDRA expires.
My lender is citi and the loan is owned by Freddie Mac. Anyone have specific knowledge for that situation and likelihood of pursuing deficiency judgments?
I can deal with bad credit for quality of life/pain relief and even eating the taxes to the tune of 29K...but if I have to pay tax on the deficiency, get sued and end up paying the deficiency, and not even have the house ...that doesn't seem to make any sense and yet seems to be what the law says.
You need to ask your short sale agent these questions. I know Oregon passed some legislation regarding these issues you are talking about and I'm 95% sure California did because I think our act was based on theirs.
Thanks Silverfall. I have. I have not signed anything with this agent yet and while I believe he is knowledgeable and forthright I'm trying to do some independent fact checking so I don't end up in a worse position than I already am...and not to just believe him because it's what I want to hear I will go back and ask again, but I'm fact checking. A lot of experts make mistakes, because they maybe didn't consider 1 piece of the scenario.
My short sale specialist simply stated that yes, they can come after you in a recourse loan by doing a judicial forclosure but that they never do in CA...they do that on commercial property, but not on residential.
Never is a strong word. Anyone know of anyone who was judicially forclosed upon in CA for a residential mortgage?
Your real estate agent can help you complete a short sale.
A real estate LAWYER can help you understand the legal and financial consequences.
Don't confuse the two. Ask a lawyer!
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I will go back and ask again, but I'm fact checking. A lot of experts make mistakes, because they maybe didn't consider 1 piece of the scenario.
