If I stop payments now, how long till deficiency judgement?

[crucifixion]

What is the name of your state? CA

I'm up to date with my house payments on first and second, however, wife just lost her job and license (she was an RN).

Was breaking even with her income, now have to stop paying 1st and 2nd (total $2600) a month just to scratch by.

So I'll be stopping my payments starting July. How long is the process for the house to go to foreclosure? I don't care about my credit- have bigger issues in life to deal with. Current credit is 730+ and it will recover after foreclosure.

Problem is, same townhouses in my complex are selling for 330k now, and I owe 452k on mine, so while the first could get wiped out, I know the second will come after me for about 112k. So the question is, how long from now do I have until the deficiency judgement and they come after me?

Thanks.

 

[FlyingRon]

If these loans were taken out as acquisition mortgages on the property, there is probably no recourse for them to come after you when foreclosed. If the second was taken later on, then you are in trouble.

They can come after you as soon as the foreclosure happens if they are eligible then the judgement can be issued in a few weeks.

 

[crucifixion]

Thanks for the response. As far as the additional details...

The original loan(s) from 2005 were from WFB, a 1st for 340k and a 2nd for 86k, total of 426k from WFB.

Then in Jan 2007 I refinanced the 2nd to BofA who made the loan 112k, and deposited 26k into my bank account.

So not sure what this means.

Does it mean that BofA could only go after me for the 26k they put in my bank?

Or does it mean that since I did a refi and took it from WFB to BofA, that since BofA paid off the 2nd from WFB of 86k, and then put 26k in my bank that I'm liable for the whole 112k?

 

[FlyingRon]

Actually, the entire second mortgage may now be a recourse loan in this case.
You might find more information by reading your actual deed of trust (mortgage document).

 

[crucifixion]

Well I guess I'm screwed.

I went thru the docs but really couldn't find anything that said "recourse".

What I did see was:
Promissory note and Short form deed of trust- says the $112k is secured by mortgage, deed of trust. Basically saying if I am in default, the bank can request immediate payment. If after time I haven't made payments, the bank can sell the house at a public auction and payoff the loan and then any applicable parties.

So nothing definite that says you must pay this back 100% if public sale doesn't cover the balance, but reading the way it was worded, I can see its more likely that I am screwed

 

[bebik22]

acquisition mortgages vs. non-recourse loan ?

I dont get it ....so back in this case will only go after recouse loan and not initial mortgage taken out to buy a property ...why?

here is what I found so far: nonrecourse debt or non-recourse debt or nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the lender is simply out the difference. Thus, non-recourse debt is typically limited to 80% or 90% loan-to-value ratios, so that the property itself provides "overcollateralization" of the loan. A lender of non-recourse debt depends crucially on an accurate assessment of the credit of the borrower, and a sound knowledge of the underlying technical domain as well as financial modeling skills.

 

[LindaP777]

Is California a non-recourse state? I was just talking to someone who said it was.
What are the non recourse states? Florida, I think is one.

 

[crucifixion]

California is a non-recourse state, but depending on what type of additional loans you have, that can change. I think all first mortgages will be non-recourse. After that, its up in the air.

So then based on what Bebi just said, and based on the fact that my promissory note with my 2nd mortgage (BofA) says that my 2nd is secured by the property, does that mean I'm out of the woods completely and that if I go into foreclouse, BofA can't come after me for any of the money????

 

[FlyingRon]

As I said earlier. ACQUISITION loans are not recourse. I suspect refinances of those loans are non-recourse as well. However a money-out refi of the second most likely is a recourse note (For the full amount of the note).

 

[crucifixion]

As I said earlier. ACQUISITION loans are not recourse. I suspect refinances of those loans are non-recourse as well. However a money-out refi of the second most likely is a recourse note (For the full amount of the note).

Yeah but see I'm confused when its a refi of a non-recourse AND its money out. I had a $86k with WFB that I refi'd to BofA for $112K and they put $26K in my bank as cash. But the promisory note from BofA reads that the loan amount is secured by the property, suggesting its non-recourse. But they gave me $26k. So maybe the $26k is only applicable as recourse? I dunno, I'm confused.

 

[crucifixion]

So let's assume the second is non-recourse as well.

What happens if I continue paying my first, BUT I stop making payments on my second.

What happens?

House can't go into foreclosure since I'm current on my first, but something negative has to happen (other than credit).

What would happen in this situation?

I'm assuming that maybe after 5 or 6 missed payments on the second, that maybe I can cut a deal with the second and pay a negotiated amount to relieve me of the obligation.

Any thoughts?

 

[LindaP777]

House can't go into foreclosure since I'm current on my first, but something negative has to happen (other than credit).

Sounds like Ron might know more about your types of loans, so wait for him.
But certainly, second mortages lenders can foreclose. If they do, they would be at the sheriff's sale to keep the bidding going high enough to cover the first mortgage and then their second mortgage. The buyer (or second mortage holder, if no one out bids them) would pay off the first mortgage first, and then the second.

 

[crucifixion]

Sounds like Ron might know more about your types of loans, so wait for him.
But certainly, second mortages lenders can foreclose. If they do, they would be at the sheriff's sale to keep the bidding going high enough to cover the first mortgage and then their second mortgage. The buyer (or second mortage holder, if no one out bids them) would pay off the first mortgage first, and then the second.

Well the value will never get that high.

Right now the first with WFB is $340K and the second with BofA is $112K. This year, there have been a couple sales for the exact same townhouse in my complex. One was a regular sale, for $390K in January. In February there was a short sale for $336K. Right now, the townhouse that shares the same wall as mine (next door neighbor) has listed theirs for sale at $330K and in this market, I would estimate would be lucky to get anything in the 300s.

So not sure what the second can do.

If I stay current with my first but just flat out stop paying the second, I don't see what the second can do? Definitely waiting for Ron's input on this.

 

[crucifixion]

Well the value will never get that high.

Right now the first with WFB is $340K and the second with BofA is $112K. This year, there have been a couple sales for the exact same townhouse in my complex. One was a regular sale, for $390K in January. In February there was a short sale for $336K. Right now, the townhouse that shares the same wall as mine (next door neighbor) has listed theirs for sale at $330K and in this market, I would estimate would be lucky to get anything in the 300s.

So not sure what the second can do.

If I stay current with my first but just flat out stop paying the second, I don't see what the second can do? Definitely waiting for Ron's input on this.

In addition to wanting Ron's input on the above, I also have another inquiry:

When I stop making payments, the bank is going to call me. Are they allowed to call my work as well? If so, what do I have to do to prevent this (other than making payments)

 

[nextwife]

So let's assume the second is non-recourse as well.

What happens if I continue paying my first, BUT I stop making payments on my second.

What happens?

House can't go into foreclosure since I'm current on my first, but something negative has to happen (other than credit).

What would happen in this situation?

I'm assuming that maybe after 5 or 6 missed payments on the second, that maybe I can cut a deal with the second and pay a negotiated amount to relieve me of the obligation.

Any thoughts?

Wrong. A lender can foreclose from second position. They must pay off the first. Or if THEY have both first and second, they simply foreclose on their second.

And, as I understand it in CA, if these loans are not PURCHASE MONEY MORTGAGES, they ARE recourse loans.