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Short sales and recourse status

Real Estate Sales Representative with Area Pro Realty NorCal

I looked at the web discussions about recourse and non-recourse loans and then opened the textbook. Purchase money loans are non-recourse..even if junior lien. Subsequent loans and refis not protected by anti-deficiency measures.

The big gap in textbook and discussion on web.. 80/20 purchase money scenario that used a credit card type HELOC as the second purchase money loan. Is the HELOC recourse in this situation if the 1st position lender forecloses non-judicially?

My query regaards CA only.



Can anyone please let me know where I can find info regarding my situation, we live in California.

We have a Cal HFA loan as a 1st mortgage (original purchase money).

Cal HFA is foreclosing on the house because we rented it, even though we are current on our payments. We were unaware that our note had an 'owner occupied only' clause. Since we rented the home we defaulted on that part of our agreement.

We are not going to fight the foreclosure since we are upside down on the house anyway.

The part of this forecloser that concerns me is that there is a home equity loan also (through Wells Fargo). Half of the home equity loan consists of 3 'defered-payment loan' (or silent loans) that we used as down payment asssistant program for 1st time home buyers through Cal HFA. The other half of the loan was used to make upgrades on the home. The total home equity loan is $80,000. So, would the $40,000 that was used to consolidate the 3 defered-payment loans still be considered original purchase money and therefore be non-recourse? Would we need to hire a Real Estate Lawyer to fight this?

How and when will Wells Fargo come after us? Or will they at all?

Thanks in advance!

Oct 23, 2008 09:09 AM