How do I know if I have a Non-Recourse Loan?

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I live in California and need to have a condo in Phoenix, AZ foreclosed on. It has gone down 100k and I can’t afford it anymore.

Both California and Arizona have anti deficiency laws protecting me. I have talked to two lawyers (one in CA and one in AZ). They both say if my loan is a “non-recourse loan” I am protected.

How do I find out if it is? I have been going through my loan documents, but there is so much information there. I also called CHASE (my lendor), but the woman had NO CLUE what non-recourse meant.
I don’t want to call chase again because someone will probably know I want to foreclose.

I have not refinanced on this loan at all. (I did on my CA house during the 30 years I’ve lived here).

But before stopping payment on the mortgage for the Arizona COndo, I want to be 100% sure my loan is a non-recourse.

I just want to make sure I am getting the right information. I have NOT refinanced on the mortgage for the PHOENIX, AZ condo that will be foreclosed on…

I HAVE refinanced on my house in California (that I live in) since moving in 30 years ago.

Are these loans kept separate? I just want to make sure that refinancing (before buying the AZ condo) on my own house won’t affect how the loan for AZ was taken out.

  1. Reply
    Glenn S
    May 4, 2011 at 2:56 am

    Why are you asking this question here? Are you going to take the advice of anyone here over your lawyers?

    Being recourse or non-recourse will not be in your loan documents, but it is a matter to state law where the property is located.

  2. Reply
    May 4, 2011 at 3:54 am

    Ask the lawyers – they should know how to tell if the loans are non recourse debt.

  3. Reply
    May 4, 2011 at 3:55 am

    The value of the condo has gone down 100k? If so, is that why you want to dump it or because you don’t have any assets anymore and you can’t afford the payments? If you live in California, I would assume that is your primary residence. Depending on states laws primary residences are more easily non-recourse than second homes or investment properties.

    If you put the condo up for sale and get an offer, you would have a much better time getting a short-sale. In order to get a short sale to go through you would need to be behind on payments. If the bank then believes that you have no assets or money to cover the difference they will most likely grant you a no recourse short sale. You will have to provide them with all your financials though in order to qualify and be approved.

    If I were you I would seriously look and see if this is a smart path to go down. If you have a 30 year loan, you are already agreeing to paying double what you bought the house for so really what is another $ 100,000 in a paper loss currently. If you keep it through and rent it out or use it as a second home, whatever you originally intended. After you pay the home off you will be much better off.

  4. Reply
    Bill Tsouvalas
    May 4, 2011 at 4:12 am

    nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender’s recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the difference between the value of the collateral and the loan value becomes a loss for the lender. Thus, non-recourse debt is typically limited to 50% or 60% loan-to-value ratios, so that the property itself provides “overcollateralization” of the loan.


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