Can A Lender Pursue You After A Short Sale – Sherman Oaks Real Estate

by Mario Acosta on July 6, 2011

in Sellers, Short-Sale

Your Lender May Have Recourse

Sherman Oaks homeowners need to be aware of the different types of mortgage loans and their impact in a short-sale.

There are two types of loans in California, “recourse” and “non-recourse.”  A non-recourse loan is a loan obtained to make the initial purchase of a home, also called a “purchase money loan.”  If you go through a non-judicial foreclosure process with a non-recourse loan, the bank will not be able to come after you for a loss or deficiency.

Non-Recourse Loans

If you complete a short-sale with a non-recourse loan, some attorneys feel you should be protected and not have to worry about the bank pursuing you after the sale.  Other attorneys feel that the California Civil Code of Procedures does not address the short sale issue and does not protect non-recourse loans, and only foreclosure offers full protection.  The bottom line is no precedent has been set in court and no lender has challenged it to this point as far as we are aware.  It’s important to have an attorney explain to you CA Civil Code of Procedures 580b, 580d, and 726, as we cannot provide legal advice to our clients.

Recourse Loans

If you have done any type of refinancing or obtained a cash out refinance or have a Home Equity Line of Credit (HELOC) taken out after the original date of purchase, then it’s possible these loans would be consider “recourse” loans.  Your lender would have the ability to come after you for any unpaid difference  if you go through a short sale, unless you receive a short sale approval letter from your lender specifically stating that they will not purse you for a deficiency judgement or some other similar verbiage.  Every lender issues a completely different approval letter format with different verbiage, so it’s important to thoroughly review your approval letter when it is issued.   We have attorneys available for referral to help you review your approval letter so that you fully understand if there is any possible recourse from your lender.  It’s our short sale team’s goal to help gain you full release from any liability from your lender when obtaining a  short sale approval on your Sherman Oaks real estate.  We have an excellent success rate with approval letters.

Check here to find out more information about Sherman Oaks real estate short sales.

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Post by Mario Acosta

Mario has written 117 articles.

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