In talking to the HELOC provider (a credit union) -- loan balance is about $35,000 -- they tell me they insist on getting about 10% ($3500 or so) or they won't approve a short sale. Their attorneys advise that it's better for them to let the first foreclose, then go after a deficiency judgement later since the HELOC was not purchase money. They think they can get more $$ this way in the long run, rather than agreeing to short sale, taking less than 10% and waiving future deficiency rights under our new laws.
Any thoughts or comments? Thanks!
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They can not pursue the deficiency, that is the point of the new law. However, they do not need to approve the short sale. Maybe they have insurance that will pay them more than what the 1st will give them. The buyers and sellers are still allowed to voluntarily give them money to settle so that may be a way to go.
Hi Marcy
Thanks for the reply. I thought the new law only limits deficiencies only when banks actually approve the short sale ???? Not that all pursuits of deficiency are eliminated. Or am I misunderstanding?
I am not a lawyer. My understanding is that if they want to pursue a deficiency they can not do a trustee sale, but have to go through a judicial foreclosure which the first lender has to do. There is a one action rule in Ca that says they can not get deficiency without going thru judicial foreclosure which I thought could not be initiated by the second. Anyone else know more about this?
If any lienholder (California property) approves a short sale (1-4 unit), they can not pursue a deficiency. If the 1st lienholder forecloses, the 1st lienholder can not pursue a deficiency. If there is a 2nd, 3rd or ??? (and it was not purchase money), and the 1st forecloses, the latter lienholders may pursue a deficiency. If the latter liens were purchase money, they may not pursue a deficiency if the 1st forecloses.
Thanks, this is exactly what the 2nd was telling me. They will let the 1st foreclose, if the 2nd doesn't get their 10% then will go after the seller for deficiency judgement. And hope that the seller doesn't file bankruptcy.
This 2nd was a cash out refi, not purchase $$.
Thank you everyone who replied.
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