recourse vs. non-recourse loan foreclosure short sale
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!
