Non Recourse States

[kriptik]

I live in a non recourse state and if I'm understanding things right that means that after the forclosure and sale of the house the banks can't come after me for the difference. Ist that right. What other things can I be on the hook for when the process gets going?

[justbroke]

If the loan is a "purchase money loan" then the lender/creditor would not be able to sue you for any deficiency caused by the sale of the home for less than the amount owed (balance on your loan). However, if you refinanced the loan at any time, this "purchase money" status no longer exists and you could be sued for the deficiency!

[kriptik]

If the loan is a "purchase money loan" then the lender/creditor would not be able to sue you for any deficiency caused by the sale of the home for less than the amount owed (balance on your loan). However, if you refinanced the loan at any time, this "purchase money" status no longer exists and you could be sued for the deficiency!

Ok so my original loan was for 165000. I did a refi in 2005. I now owe 195000 on the mortgage. It is now worth 188000. I'll owe 7000+ whatever fees? thanks for the insight.

[justbroke]

Ok so my original loan was for 165000. I did a refi in 2005. I now owe 195000 on the mortgage. It is now worth 188000. I'll owe 7000+ whatever fees? thanks for the insight.

You'll owe the different between what it sells for, not what it's worth! In some States, such as North Carolina, the person who is foreclosed upon can challenge the valuation of the property when it's sold. However, this can be difficult to challenge if the home was sold at an auction (where there were competitive bids). At an auction, the value which is bed, is probably the "market" value for the (distressed) home in that type of auction. In other words, if the bank outbids other bidders and "purchases" it for $145,000 at auction, you will owe substantially more than $7K plus fees.

The fees will be all of the creditor's attorney fees, auction fees, collection fees and any other fees that they are "contractually" authorized to charge (as specified in the Note or Mortgage/Deed of Trust). Additionally, the cost for the REO owned property (the status it gets after the bank "buys" it back at auction) to be sold by a Realtor, will be lumped in as well. The standard 6% is an additional amount that could be recouped in any recourse action.

From what you just posted, it appears your loan is not a "recourse" loan by definition.

[kriptik]

From what you just posted, it appears your loan is not a "recourse" loan by definition.

OOPS that what I ment!what it sells for!!
Yeah I got more homework to do. that was a simplified example.

Thank you!

[horse]

I never heard of "non recourse states". Did you file for BK? I was under the impression that if you file for BK and you don't reaffirm the mortgage you can just walk away from the house owing nothing. Is that correct?

[ccsjoe]

Yes horse, under BK you are no longer liable for any deficiency. However, if not under BK, but regular foreclosure, short sale, etc, there are states where "purchase money loans" are considered non-recourse. This goes out the window when you refi.