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Showing posts from August, 2012

Can a Lender Just Sue the Borrower on the Note?

A lender cannot sue on a debt secured by a mortgage or trust deed except for a judicial foreclosure. This is called the 'one action rule' or 'one form of action rule'. One exception to this rule is if the security for the loan has become 'valueless' after the lender's security interest was recorded (a 'wiped out' junior lien holder.)

In this case, the lender can sue directly on the debt (note) unless the borrower's loan was used to purchase a residential 1-4 unit dwelling all or part of which is owner occupied or if the purchase money loan for any type of real property is financed by the seller and secured by that same property.

Speed Up the Process: Complete Your Short Sale Package!

A short sale request typically involves a lot of paperwork. You may greatly expedite the process by providing your lender with a complete short sale package containing all the required information and documentation in an organized manner.

Getting paperwork to the lender piecemeal is likely to cause delays.

Deficiency Judgment Explained

A deficiency judgment is a judgment obtained by the lender in court against the borrower for the difference between the unpaid balance of the secured debt and the amount produced by sale or the fair market value of the security, whichever is greater, in a judicial foreclosure. (Cal. Code Civ. Proc. 726(b).

A lender may obtain a deficiency judgment only with a judicial foreclosure. With a trustee's sale foreclosure, the lender cannot go after a deficiency judgment.

What is Recourse Debt?

Under California law, a 'recourse' debt is one in which neither of the two exemptions in a 'non-recourse' debt occurs.

Examples of recourse debt are refinances of existing mortgages, home improvement loans, equity lines of credit and loans other than seller financing, securing a debt for purchase of property that is not an owner-occupied one-to-four unit property.

The lender is not limited to taking the property back and the borrower may be personally liable on the debt. If the lender chooses to foreclose using a trustee's sale, then the lender waives the right to go after the borrower for the defiency despite the fact that the loan was a recourse debt.

In order to go after a defiency judgement, the lender must go through a judicial foreclosure process.

What is Non-Recourse Debt?

Under California law, a 'non-recourse' debt is when a loan is made under either one of the following two circumstances:

1. When the loan is made to purchase a one-to-four unit property and the borrower intends to occupy at least one of the units.

2. When the seller carries the back financing for all or a portion of the purchase price of any real property.

In the event of default by the borrower, the lender, or financing seller, this is restricted to recovering the property with no right to proceed against the borrower for any deficiency should the property be worth less than the loan amount.

What Happens After You're Offer to Buy is Accepted

Finding a home to buy and negotiating the purchase is rarely easy. After you've successfully completed the negotiations, it's time to celebrate. As soon as the euphoria wears off, you may be wondering what happens next. Within a few days after the sellers accept your offer, your good faith deposit check is cashed. A neutral depository holds the money until the sale is either closed or cancelled. Who holds your money depends on where you're buying. Some states, like California, use escrow accounts to handle the financial aspects of a home sale. In other states, your broker or attorney may take care of these details. Make sure that you have sufficient funds in the account on which you wrote the deposit check. If you need to transfer funds from one account to another, let your agent or transaction coordinator know. Your contract should include contingencies to protect you. A contingency is a condition that must be satisfied for the sale to go through. If a contingency can…

Avoid Scam Artists

Be wary of scam artists who prey on distressed homeowners hoping to dupe you out of your money and property. As one homeowner who fell victim to a foreclosure-rescue scam said, 'When you're down and out you'll believe anything.' Watch out for the common signs of a scam, such as someone who asks for money upfront, asks for you to do something immediately without delay, or gives you an unqualified promise to stop foreclosure or other assurances. Also watch out for new types of scams which crop up every day!

Take a Proactive Approach to Your Short Sale

Wen you're an 'upside down' seller owing more on your mortgage than your property is worth, the prospect if selling short is likely to be upsetting. You may have never expected that owning a piece of the American dream could turn into a nightmare. Despite the grim realities, selling in a short sale may get you out of a bad situation. But, it may take a commitment of time and effort on your part. Taking a proactive approach to your short sale may help you get out of that nightmare as quickly and painlessly as you can.