CA Mortgage: recourse/non-recourse
February 24, 2012 1:33 PM   Subscribe

California Mortgage question: is it recourse or non-recourse?

My girlfriend is underwater with her mortgage. She is trying to negotiate a lower payment with the mortgage holder but they are dragging their feet. Recently, they increased the valuation of the property significantly without giving reason. We recently learned that California is a non-recourse state. Our understanding is that if the mortgage is defaulted, the mortgage holder cannot sue for the difference between a liquidation sale and the mortgage amount. This is significant to us and may lead to the only viable path to regain financial balance. I have the first and second mortgage paperwork but cannot find where it is stated if the mortgage is recourse or non-recourse (most seconds are recourse, we hear). Naturally, we don't want to call the mortgage holder and ask since this might tip our hand. Where do I look in the paperwork to determine if it is recourse or non-recourse? Is there particular boilerplate or a discrete section that would mention or define this condition? Thanks to all.
posted by middleport to Law & Government (2 answers total)
If the mortgage was purchase money and you haven't refinanced it then generally it's non recourse and the debt is secured by the property itself. You will not find recourse vs non recourse in the loan paperwork, it's a california state statute governing real property that contains that language. what you should be looking for in your paperwork is language pertaining to trustee sale, which lets you go through a non judicial foreclosure (this is 99.99% of mortgages in california).

Go to loansafe dor org and start getting educated, take the advice there with a grain of salt.
posted by iamabot at 1:36 PM on February 24, 2012 [1 favorite]

She should contact Community Housing Works to see if there are any non-profit resources in her area to help decide what is best for her situation. (Those are the only folks I know who are really awesome in this field.)

Loan restructuring isn't out of the question. The bank has many incentives/reasons that are good for their books to forclose, but I'd avoid that. She should try to restructure, and folks like those above can help. This is one program available. The only problem with this that I've heard of is when people try to use fly-by-night operations who recommend missing mortgage payments and end up getting forclosed on. (I think those operations are illegal now, though.)

I know a few families here in San Diego who've walked away with no problems at all. One friend of mine actually purchased another (reduced value) home while he was walking away.

There are too many details though, so I suggest getting in touch with a pro.

My personal experience is that my mortgage was sold several times and ended up with what is essentially a debt collector that actively persued forclosure even though I was paying on time. Through that non-profit org I was able to restructure and get them to leave me alone.

Good luck to both of you!
posted by snsranch at 6:39 PM on February 24, 2012

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