patrick.net

The short sale will cost ~40K out of pocket, at least, from what I can tell. If they have no recourse after a foreclosure, it will only cost what we have invested in the house (nothing out of pocket, at least to the bank).

I thought all purchase money loans in CA were non recourse. If you didnt refi or go in with a 2nd lien - maybe they have no way to 'get you'.
You really should be collecting rent on that IMO - it may take them 5 years to foreclose.
They might never foreclose.
Its really crazy now huh.

PockyClipsNow says

I thought all purchase money loans in CA were non recourse.

People keep repeating that, but California is a single action state. I hope the OP will heed Roberto's original advice to seek specific counsel because each situation is unique, and update as to what the best solution turns out to be and why.

thats a good link.
this guy rented out his home....so possibly they could go after him. of course he should also speak to a BK attorney.

curious2 said: People keep repeating that, but California is a single action state.
In addition to the fact that purchase money loans for owner occupancy are non-recourse (last I checked, yep, still there).
http://www.legaltips.org/california/california_code_of_civil_procedure/577-582.5.aspx
580b. No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of
trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser.
For some opinions about a primary residence converted to a rental, see this link:
http://www.avvo.com/legal-answers/i-converted-my-home-in-california-to-a-rental-afte-198145.html
IANAL. YMMV.

Ask the bank if they have the wet ink mortgage & the wet ink promissory note. Uh-Oh! We can't find them. LOL

A real estate attorney is a good idea.

EBGuy says

curious2 said

Please read your own quotation from 580b and note the word "after," which you might want to look up.

@beentheredonethat,

1) A short sale doesn't cost you a nickel. You understand that wrong. You might be able to get free money from your lender. The short sale approval letter will state that your deficiency judgment is $0. On a short sale, you're also being protected by SB-931 so there is no deficiency judgment regardless of what the short sale letter said. Sweet isn't it? If you're in the Bay Area or in SoCal, ping me. I can refer you to someone. I might be able to collect a 25% referral fee on the listing side. :)

2) Yes, CA is a one action rule state. Unless you're worth some nickels, your lender will not pursuit a judicial foreclosure. Even when you're worth some nickels, they would still opt for a non-judicial foreclosure. The guy you're dealing with at the bank is making $10-$12/hour. He doesn't know crap.

If you're working for the government now or you may work for the government in the future, I would avoid a foreclosure on your record if possible. If you're in the military, they will discharge you with a foreclosure on your record. If you're working for the IRS, there's a very high chance you will lose your job. If you work for East West Bank and you defaulted on their loan. They fire your ass. :)

E-man says

1) A short sale doesn't cost you a nickel. You understand that wrong. You might be able to get free money from your lender. The short sale approval letter will state that your deficiency judgment is $0. On a short sale, you're also being protected by SB-931 so there is no deficiency judgment regardless of what the short sale letter said. Sweet isn't it? If you're in the Bay Area or in SoCal, ping me. I can refer you to someone. I might be able to collect a 25% referral fee on the listing side. :)

What I meant by shortsale costing us was: We have stopped paying, and as far as I understand things a short sale means getting current on the mortgage, current on taxes, etc. Then, the bank's offer was 'net to the bank of 200K (for example)'. it was appraised at 150K (e.g.). So that means as far as i can see:
Couple of K$ to get current
Couple of K$ for taxes for '13
Sell for 150K (just as an example)
Pay the broker fee (-5K or something)
Cough up 200K ('net to bank')
Which looks to me like 50k+ out of pocket.
At least this was their initial foray...

California's SB 931 disallows deficiency judgments after short sales that were bank approved.

SB 458 subsequently amended that to include junior lenders, too.

The bottom line is, in California, if the lender approves the short sale, they can't go after you later for a deficiency judgment. They also cannot force you to sign a promissory note or require you pay them any extra money upfront..

Look up SB 931 and SB 458.

Looks like E-man beat me to it. Listen to the man!

If you refinance in 2013 in CA... your loan becomes non-recourse again or stays non-recourse if it was a purchase money loan to begin with. A law went into effect Jan 1st, 2013 that makes all new refinanced loans non-recourse.. (as long as you don't pull any money out in the refinance).

I'm seriously considering refinancing again.. My current refinance in fall 2011 was at 3.95% .. so i wouldn't save much refinancing now... and it's kind of a hassle.... BUT, it would be nice to have the peace of mind of being in a non-recourse loan again.

Then again, i already have 15%-20% in equity in the place... depending on what my appraisal came in at.... So shit would really have to hit the fan for me to want to walk away... especially since I should have no problem covering the current mortgage if i rented it out.