http://loansafe.org/forum/showthread.php?p=5350

Best luck to everyone,

Phil

There is a definitely difference between a purchase loan as a second mortgage, and a HELOC loan. To my best knowledge, most of the piggy-back loan deals are structured as HELOC loan, and that is WHY you are NOT paying the PMI mortgage insurance. And that also means that you fall under HELOC, and it is fully a recourse loan.

Sorry that I haven’t had time to reply these. Certainly, I would advise anyone to talk to professionals.

Best luck to everyone.

He talks about “purchase money” being the defining characteristic of a non-recourse loan, but in the same breath says that 80/20s, both which are “purchase money” (i.e. used to buy the house) have the 20 as a recourse loan.

This is incorrect. The author compounds his mistake by going on and on about how the banks aren’t so stupid..you’re right, they aren’t. They were just greedy.

A second mortgage is not the same as a HELOC. If used to buy the house, and not refinanced, it is a non-recourse loan. Get your facts straight, Frugal. A little “googling” on this subject would serve you well.

He talks about “purchase money” being the defining characteristic of a non-recourse loan, but in the same breath says that 80/20s, both which are “purchase money” (i.e. used to buy the house) have the 20 as a recourse loan.

This is incorrect. The author compounds his mistake by going on and on about how the banks aren’t so stupid..you’re right, they aren’t. They were just greedy.

A second mortgage is not the same as a HELOC. If used to buy the house, and not refinanced, it is a recourse loan. Get your facts straight, Frugal. A little “googling” on this subject would serve you well.

do you have any other thoughts on this?

I might be missing something here though, so just wanted to check with you on what you thought before I assume anything.

So let me see if I understand this correctly.

Let’s say that I am a resident of California.

I have a 1st mortgage at $375k and a second mortgage at $50k, totaling $425k owing to two different banking institutions.
Because of the housing market, my home is on the market for $325k, which is $100k less than what I owe the bank(s).
I have not had an offer in the 18 months that the house has been on the market.
Plus, I owe back property taxes of $12k.

I have not paid the last two of my mortgage payments, and intend to let the bank take the house via foreclosure.

Does this mean I am able to walk away from the house and the only real liability is to have my credit rating drop perhaps 250 points;
OR
does it mean that I will have my credit rating drop, AND owe the I.R.S. taxes on the $112k differential between where the house is now priced and my outstanding mortgages plus the overdue property taxes ?

(I thought that the latter only occured in a short-sale situation, rather than a foreclosure)

Thank you.

The article says,

“But in California, refinanced loans, second trust deeds and home equity lines of credit are generally considered recourse loans. In these cases, a lender can file suit and go after almost any of the borrower’s assets once they obtain a court judgment.”

“Generally considered” by WHOM? The court? The lender? The borrower? The article is misleading because it does not consider that the terms of the contract are going to be what determine the outcome of the proceeding. I am only personally liable for any shortfall if I have specifically agreed to that as a personal loan. The author should seriously reconsider revising. This is serious business and it amazes me how much misinformation is spread.

I just read another good article exactly on the same topic. It’s from OC register. A very good article, and their advice of selling the home without going foreclosure is the same advice that I would give. It’s far better to handle the entire process yourself, instead of having lenders to give you a thousand cuts at every step of the process, when you will be due for a deficiency judgment.

Also remember this: mortgages aren’t the only kinds of liens that can be attached to your property. Handymen can place mechanic’s liens on your property if your fail to pay them for service (perhaps you had a dispute over quality of work?). You might get sued, lose the case, and have a judgment attached to your real estate. Not only that, but don’t forget about tax liens from the IRS or local governments!

I would just like to re-iterate to the readers here that not all states allow lenders to collect deficiency judgments from you. Also if there is a bankruptcy involved (especially if you’re filing Chapter 11 for you and/or 13 for a business) then things can get really strange (both good and bad). A bankruptcy can actually eliminate some of your tax liabilities, but it also might cause you to lose 100% of the equity of your home.