i know im florida its the reverse you can bankrupt yourself, but they can't touch your house haha, the irony! lol
Not completely true. No other creditors can touch your house (if the house has been filed as your primary residence) when you bankrupt. But if you can't pay your mortgage, your mortgage lender (and only your mortgage lender) will take your house.
so you saying, a person in california can have $10 million cash in the bank, and just decide they dont feel like paying their mortgage anymore, drive over to the bank, throw the keys at the bank manager, go buy some condo in miami cash and live there, and the only repercussion is going to be some sort ding to their credit report?
Yes. BTW you don't have to leave california. You can buy another home at lower price, or buy back your own home at "foreclosure". You don't have any obligation to drop your keys. This is our financial system. LOL. I like to add one point. I don't live in California. I "believe" it is generally true for most states. Do your own diligence and check with your local lawyers to confirm that. [edit] Of course your credit score will be a lot lower if you don't pay your mortgage.
If you get foreclosed on you are liable for the whole amount owed plus any "fees", regardless of of what the house brings in a foreclosure sale. If you owe $100,000 and the bank forecloses and sells your house for $70,000. You still owe the $30,000. Read your Deed of Trust/Mortgage documents. Also, lets say same scenario, only lender allows a "short" sale where they allow you to sell your house for less than is owed. In other words they are "forgiving" the $30,000 so you don't "owe" the bank, but at the end of the year you get a 1099 from the lender showing the $30,000 as "income" and it's fully taxable.
On a standard mortgage, if you Foreclose and there is not enough proceeds for the bank to payoff the principal, then they can go after all your assets to recover their loss. They can even garnish your future wages. UNLESS, you received what is called a "NO RECOURSE" mortgage. They can and WILL go after your assets if the amount is worth it. I know of no bank that provides "NO Recourse" terms on residential properties less than 4 family. Also, i believe the banks are currently preparing for this line of thought.
Thank you for posting the updated info. I apologize for passing the old info. I was told by my professor 10 years ago when he talked about asset-backed loan.
The answer is YES if they have not refinanced the property in any way. In the great Socialist Republic of California, deficiency judgements are barred by California Civil Code 580b for the initial purchase of a home if the loan obtained was used to purchase the property. Even if the loan documents say "full recourse loan" it is automatically barred by California statute. You cannot sign away your statutory rights in California. The initial loan is automatically non-recourse. The answer is No if the property is subsequently refinanced. The refi-loan would be a full recourse loan. So to relate this to the current subprime mess, if Joe California gets 100% financing to buy a home in 2005 and thinks he can flip it for a 50% profit in 2007 while living in it, why not take the plunge? Joe either makes a big profit or walks away from the property and can even live in it for free by not making the monthly payments until he gets foreclosed. Only in California can you get this kind of deal! The upside is a big profit, the downside, if you can even call it a downside since Joe already had bad credit when he bought the place, is another ding on his credit report. Traditional lenders who have operated in California for years are aware of this non-recourse law. I think alot of the folks on Wall Street who are now the proud owners of a foreclosed home in a gang ridden area on the wrong side of the tracks are going to be in for a rude surprise... Here is the California Civil Code section: 580b. No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser.