Get the facts before considering a short sale
By: Rob Jordan
According to the Los Angeles Business Journal, certain foreclosed California homeowners who refinanced their homes could owe thousands of dollars to lenders.
HERE ARE THE HIGHLIGHTS
- Currently, if a homeowner defaults on a mortgage used to purchase his or her home — known as a purchase money mortgage — the homeowner’s liability on the mortgage is limited to the property itself. This means the lender CANNOT sue for the deficiency (the amount not paid back.) Unfortunately, the original law did not extend the purchase money protection to loans that refinance the original purchase debt, even if the refinance only was to obtain a lower interest rate.
- Californians who refinance a property currently do not have protection if they default on a mortgage greater than the property’s value. Called a deficiency liability, under current California law, the lender can sue the former homeowner for the amount of the deficiency even after taking back the property.
- Recent years of low interest rates and aggressive marketing campaigns by lenders have induced tens of thousands to refinance mortgages. Few homeowners realized that by refinancing their mortgage, they were forfeiting their protections and now are personally liable.
- Rob Jordan, Sotheby’s International Realty/Ewing and Associates, can inform you about how a short sale works, and what your options are. He can be reached at 818.237.4425. This article originally printed in the Los Angeles Business Journal.
EwingSIR does not guarantee information contained in this blog, readers are encouraged not to rely solely on this information and to do their own independent research of facts contained herein. Blog information was obtained from independent sources that we do not endorse, and we do not investigate this information for accuracy.
