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In most states, lenders have recourse. So if you stop paying your mortgage, the bank will foreclose on your home and then come after your other assets to make u
by kotlin2 4y ago
In most states, lenders have recourse. So if you stop paying your mortgage, the bank will foreclose on your home and then come after your other assets to make up the difference in what you owe vs. what the home is currently worth.
- toomuchtodo 4y agoI’ve defaulted on two mortgages in a recourse state, one primary residence, one investment property. Neither was pursued. While extreme, you can always move to Texas or Florida; they have incredibly strong creditor protections making you mostly judgement proof. Depends on your threat model, exposure, and risk tolerance. (not legal advice, educational purposes only)
- kotlin2 4y agoHow much did you owe after the properties were sold?
- toomuchtodo 4y agoZero. And I was eligible for a new FHA mortgage 3 years after.
- kotlin2 4y agoI mean what was the difference between your outstanding mortgage principal and the value of the homes at the time of default?
- toomuchtodo 4y agoRoughly $300k in aggregate
- bushbaba 4y agoAlways thought this was predatory. California does it right in being a no recourse state. CA mortgages cost the same as elsewhere.
- bxparks 4y agoRecourse versus non-recourse mortgages is an interesting difference that most people seem to be unaware of. I do not recall reading about it in any of the disclosures (running hundreds of pages) that I had to read. I only found out about it while researching on the internet. Apparently, there are only 10 non-recourse states as of 2009: Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon, Washington, and Nevada. The tricky thing is that only the initial mortgage is non-recourse. A refinanced mortgage becomes recourse, but interestingly, they don't seem to be required to disclose that in the disclosures.
- toast0 4y agoRefinance in California remains non-recourse as of maybe 10 years ago. Washington isn't really non-recourse, lenders have the option of recourse or non when pursuing foreclosure, non-recourse is significantly faster and is predominantly chosen; but if it was known you had assets, they might choose to go recourse.
- bxparks 4y agoAccording to https://www.bankruptcysoapbox.com/california-extends-protection-for-home-loan-borrowers/ https://www.bankruptcysoapbox.com/california-extends-protect..., you are correct for loans after Jan 1, 2013. The relevant statute SB-1069 is here: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201120120SB1069 https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml...