Hi all, I am in a pretty bad situation and need some help/advise. I live in California, and purchased the house I am currently living in 2 years ago. Now my first loan (460K) is adjusting from 5.25% to 8.5%, which means an increase of $1200 in montly payment that I can no longer afford. I still owe $80K on my second loan. I had been trying to re-finance both loans into one for the last month, with no more hope that the mortgage can be re-financed due to high loan to value and high debt ratio. I tried negotiating a lower interest rate with first lender, still waiting to hear back. I also thought to try to see if both lenders will allow me to do a short-sale, but the worst that comes, it might be a foreclosure at the end of this road, if they don't grant me a short sale, or offer me a interest rate that I can afford. I just heard that in California, since this is the original loans that I obtained to purchase the house, it might be a non-recourse loan, means that the lenders cannot come after me with a deficiency judgement for the amount that's still owed on the loan balance (after all the fees, closing cost, etc, I won't be able to get $540K for the house to cover both loans). Is this true? How can I find out for sure if my first and second loans are non-recourse, or recourse loan? Also, does it make a difference on how non-recourse loan works if I short-sale the house, or the lender forecloses on the house? How does taxes work with non-recouse loan? Will I get 1099 for the difference if I short-sale with non-recourse loan?
Advanced thank you for any help/advise!

zdog

Sorry to hear of your troubles. You're not alone. In fact i'm hoping you can share your collected information with me since i'm in the same boat. could you email me or call? Jeffrey 7072906722...thanks and good luck to all of us in the boat.

ilitzky@hotmail.com

EFSolutions

Deficiency Judgment
Lenders may not seek a deficiency judgment if (1) the foreclosure is non-judicial or if (2) foreclosure is on a purchase money obligation. The same rules do not apply to guarantee or later lien holders. The lenders may seize alternative collateral. If the lender forecloses by filing a lawsuit, then the lender can obtain both a foreclosure sale order and a judgment against the borrower for a deficiency after the court-ordered sale, but only for the difference between the judgment and the fair value of the security.
Most common form of foreclosure in California is Non-judicial foreclosure.