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In California: she should pay nothing and when a realtor comes to her door, negotiate the equivalent of 1 month rent as 'cash for keys'. Could be $500, or more, maybe $2000. Depends on the condition of the house and the local market.
Equity line is a lien on the house. If the sale did not pay off the second mortgage then they are left holding the short end of the stick. Your mother shouldn't owe anything more. That is why they call it first and second mortgage. The first gets paid first.
BondGamer said:Equity line is a lien on the house. If the sale did not pay off the second mortgage then they are left holding the short end of the stick. Your mother shouldn't owe anything more. That is why they call it first and second mortgage. The first gets paid first.It will vary by state whether or not they can only go after the property or property and other funds/assets.
Normally the banks don't go after the original borrower although in some states they can. It's based on the principle that you can't get blood from a stone or that people who don't have the money to pay the mortgage probably don't have any money to pay the balance or they wouldn't have fallen behind to begin with. It's why some people with money think about just walking away from a mortgage because they know the banks aren't likely to go after them.
On a short sale, there should be some agreement that the lender won't go after the borrower for the difference in the short sale. That piece of paperwork doesn't always get done though.
Need a lot more detail before you can get helpful comments///
Not only what state this is, but whether the loans were used to purchase the home or taken out later....
In a no recourse loan situation *(such as loans used to purchase a home in CA) all the lender can get is the home and NOTHING else.
however, if you refied or got the equity line after the purchase, they are recourse loans and then the lender CAN go after you for the balance....
though in reality I have not seen ONE lender actually try to do so in CA, mostly bc the homeowners have nothing to go after. As others said, if the lender comes after her for the loan balance, BK will be her best bet
SUCKISSTAPLES said:Need a lot more detail before you can get helpful comments///
Not only what state this is, but whether the loans were used to purchase the home or taken out later....
In a no recourse loan situation *(such as loans used to purchase a home in CA) all the lender can get is the home and NOTHING else.
however, if you refied or got the equity line after the purchase, they are recourse loans and then the lender CAN go after you for the balance....
though in reality I have not seen ONE lender actually try to do so in CA, mostly bc the homeowners have nothing to go after. As others said, if the lender comes after her for the loan balance, BK will be her best bet
Something I may be missing here. Even the lender does not go after the difference now, can they go after the debt couple years from now? If this is possible, may be it is better off to just declare BK now than setting up a time bomb.
Message edited by: hr8473 on 2009-10-28 22:43:51 CDT
hr8473 said:SUCKISSTAPLES said:Need a lot more detail before you can get helpful comments///
Not only what state this is, but whether the loans were used to purchase the home or taken out later....
In a no recourse loan situation *(such as loans used to purchase a home in CA) all the lender can get is the home and NOTHING else.
however, if you refied or got the equity line after the purchase, they are recourse loans and then the lender CAN go after you for the balance....
though in reality I have not seen ONE lender actually try to do so in CA, mostly bc the homeowners have nothing to go after. As others said, if the lender comes after her for the loan balance, BK will be her best bet
Something I may be missing here. Even the lender does not go after the difference now, can they go after the debt couple years from now? If this is possible, may be it is better off to just declare BK now than setting up a time bomb.
In the credit report it would probably say that it's written off to profit and loss. Also banks used to 1099 you for the difference because you originally borrowed the money, but didn't pay it back so then it's a gift and that amount gets considered as income. However they did change the laws a few years back where if it was a primary property, it could be forgiven and you wouldn't owe taxes on it. I think if they 1099 you, then they can't very well go after you at the same time. In general it's very unlikely that any bank would pursue it and probably not worth the expense of filing BK just to prevent something that probably won't happen. There are pretty much no cases out there where this happens, only time would be outright fraud.
Normally the banks don't go after the original borrower although in some states they can. It's based on the principle that you can't get blood from a stone or that people who don't have the money to pay the mortgage probably don't have any money to pay the balance or they wouldn't have fallen behind to begin with. It's why some people with money think about just walking away from a mortgage because they know the banks aren't likely to go after them. Guys there is a vibrant secondary market for defaulted 2nd liens in the debt buyer game such as real time resolutions and Dyck o' Neal (yes, that's their real name, and it is pronounced just like you think it is)
I don't think BK is an automatic decision either in these situations.
Message edited by: codename47 on 2009-10-29 06:37:59 CDT
This is in VA. A loan was done to purchase the property. My mom placed $ 20k as a down payment but was not enough so to prevent the PMI, they did a second mortgage (HELOC)
SUCKISSTAPLES said:Need a lot more detail before you can get helpful comments///
Not only what state this is, but whether the loans were used to purchase the home or taken out later....
In a no recourse loan situation *(such as loans used to purchase a home in CA) all the lender can get is the home and NOTHING else.
however, if you refied or got the equity line after the purchase, they are recourse loans and then the lender CAN go after you for the balance....
though in reality I have not seen ONE lender actually try to do so in CA, mostly bc the homeowners have nothing to go after. As others said, if the lender comes after her for the loan balance, BK will be her best bet
Did a little bit more research and I think Virginia is a non-recourse state.(Please correct me if I am wrong) So does that mean that my mom can walk away from the deal in the case of a short sale or forclosure, not having to worry about lenders (second lien) trying to go after her ?
On her salary or future earnings?
Help on this would be greatly appreciated.
Message edited by: HavenguyZ on 2009-11-02 22:49:15 CST
xoneinax said:Yes, if a purchase money loan in a non-recourse state, you can pretty much walk away. But you might get a 1099; I am not certain on that.
non-recourse state usually refers to the class of the 1st loan. The 2nd loan may or may not be non-recourse (often the 2nd loan is recourse).
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