Replies to This Discussion

Permalink Reply by VIctor T. Gurrola on August 3, 2010 at 8:23am

It’s true; non purchase money seconds become unsecured debt just like credit cards once the value of the property fails to cover the amount owed. They will allow the Lien (not the debit) to be removed for a fee of course but they can and will ask for some sort of payment agreement typically for some lesser amount and it’s structured something like, zero interest for a period of time that makes those payments affordable for the client.

All this is situational and nothing in a short sale is ever a rule of thumb, only trends.

Permalink Reply by Timo Ketola on August 4, 2010 at 3:23am

Ok, what about when it is not a second but just a bigger first? The borrowers original loan was for $800K, he refinanced and it is now $900K and the lender is going to be getting about $800K in proceeds (used round #'s for simplicity). I am guessing that this is the same thing where he is on the hook in the future for the $100K difference?

If we assume the lender forecloses, and the proceeds from above are the same in this instance, the lender can still go after the difference correct? I just want to make sure that the lender does not waive all future recourse by foreclosing. The homeowner has some thoughts about letting it go back to the bank, and I am trying to explain to him that the difference would probably be larger if the bank were to take it REO thus putting him in worse position than short sale.

Your help is greatly appreciated. Thanks!

VIctor T. Gurrola said:

It’s true; non purchase money seconds become unsecured debt just like credit cards once the value of the property fails to cover the amount owed. They will allow the Lien (not the debit) to be removed for a fee of course but they can and will ask for some sort of payment agreement typically for some lesser amount and it’s structured something like, zero interest for a period of time that makes those payments affordable for the client.

All this is situational and nothing in a short sale is ever a rule of thumb, only trends.

Permalink Reply by Patti Lyles on August 4, 2010 at 1:32pm

Thank you for posting this. 30 minutes ago I just got my CHASE approval and it had the same language. I went to SSS and there it was, a post that addressed everything. KUDOS Timo

Permalink Reply by Laura Marshall on August 4, 2010 at 4:46pm

I spoke with one of our attorneys here in California regarding this same situation. He said that if the bank forecloses on a first, there is no right to seek a deficiency...even if it was a cash out refi or investor purchase. I do not think this applies to cash out 2nds...but I could be wrong.

Timo Ketola said:

Ok, what about when it is not a second but just a bigger first? The borrowers original loan was for $800K, he refinanced and it is now $900K and the lender is going to be getting about $800K in proceeds (used round #'s for simplicity). I am guessing that this is the same thing where he is on the hook in the future for the $100K difference?

If we assume the lender forecloses, and the proceeds from above are the same in this instance, the lender can still go after the difference correct? I just want to make sure that the lender does not waive all future recourse by foreclosing. The homeowner has some thoughts about letting it go back to the bank, and I am trying to explain to him that the difference would probably be larger if the bank were to take it REO thus putting him in worse position than short sale.

Your help is greatly appreciated. Thanks!

VIctor T. Gurrola said:

It’s true; non purchase money seconds become unsecured debt just like credit cards once the value of the property fails to cover the amount owed. They will allow the Lien (not the debit) to be removed for a fee of course but they can and will ask for some sort of payment agreement typically for some lesser amount and it’s structured something like, zero interest for a period of time that makes those payments affordable for the client.

All this is situational and nothing in a short sale is ever a rule of thumb, only trends.

Permalink Reply by VIctor T. Gurrola on August 5, 2010 at 7:16pm

Taxes on the amount cashed out would be his biggest problem regardless of short sale or foreclosure, its still his primary home and still secured debit making it still no recourse. Once again have him speak to an informed CPA or RE attorney and you can call CAR legal hot line. Don't let him go foreclosure its no benefit to anyone.