Posted on: 05th Aug, 2009 11:05 pm
I have questions about a possible foreclosure in California. Short story is that due to my wife being unemployed since 2007, 2 kids and having one more child on the way, we are deciding to stop mortgage payments on our home that we purchased in 2004. We've refi'd the loan into one single loan, no money cashed out. Since it's a refi, it's considered recourse.
Please correct anything that I state here. I understand that California Civil Code 580d says that a lender has two alternatives for defaulted mortgages, judicial or non-judicial. Most lenders go the non-judicial route because of the one year post-foreclosure right of redemption. With non-judicial, the lender goes through the non-court route to foreclose (NOD->Trustee Sale). At the conclusion of the trustee sale, no deficiency judgments can be pursued. California Civil Code 726 (one action rule) only allows a lender to either go the judicial route or non-judicial, but not both.
So if we stopped payments and the lender went the non-judicial route, only the house is lost and no deficiency judgments can be pursued. However, if the lender pursued the judicial route, they can go through the courts to foreclose on the home and also pursue any deficiency judgments. I've read that judicial foreclosures in Calif are rare due to the one year right of redemption.
I'm asking the real estate experts in Calif if my information and assumptions are correct. We are trying best to understand our situation.
Also, are we at risk for California debt forgiveness costs? I believe that the Mortgage Relief Act of 2007 relieves me from any IRS tax consequences as this is my primary residence. I think that this act was extended through 2011.
Thanks!
Please correct anything that I state here. I understand that California Civil Code 580d says that a lender has two alternatives for defaulted mortgages, judicial or non-judicial. Most lenders go the non-judicial route because of the one year post-foreclosure right of redemption. With non-judicial, the lender goes through the non-court route to foreclose (NOD->Trustee Sale). At the conclusion of the trustee sale, no deficiency judgments can be pursued. California Civil Code 726 (one action rule) only allows a lender to either go the judicial route or non-judicial, but not both.
So if we stopped payments and the lender went the non-judicial route, only the house is lost and no deficiency judgments can be pursued. However, if the lender pursued the judicial route, they can go through the courts to foreclose on the home and also pursue any deficiency judgments. I've read that judicial foreclosures in Calif are rare due to the one year right of redemption.
I'm asking the real estate experts in Calif if my information and assumptions are correct. We are trying best to understand our situation.
Also, are we at risk for California debt forgiveness costs? I believe that the Mortgage Relief Act of 2007 relieves me from any IRS tax consequences as this is my primary residence. I think that this act was extended through 2011.
Thanks!
As far as I know, in California, the lender will not be able to sue you for the deficient amount resulting from the foreclosure sale of the property. The lender will send a 1099c form as he is forgiving the balance amount. The IRS will consider this as your income but due to the Mortgage Debt Relief Act, you won't be charged taxes for the forgiven amount.
I lost my job in 2006 and soon after lost my house. The bank took the house back and did not sell at auction. I was looking at my credit report and it shows that the 1st mortgage account was closed due to foreclosure. The 2nd mortgage shows that its still open. I've tried to talk to the lender regarding the situation and haven't been able to resolve anything. Is there anything that I can do to get the account closed considering that it has been several years that I was foreclosed on?
Hi Guest,
It is quite surprising that the account is still open. You can negotiate with the second lender and settle the mortgage. You can negotiate for a lower amount and pay off the dues. Once you do so, the account will be closed.
It is quite surprising that the account is still open. You can negotiate with the second lender and settle the mortgage. You can negotiate for a lower amount and pay off the dues. Once you do so, the account will be closed.