I live in SD,CA.I have 2 mortg. If I foreclose on the 2nd first will that prevent me from owing a deficiency?

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I bought my condo 2 yrs ago in Chula Vista California. I have two mortgages for my home. The first one the big one is interest only 4.625 wich jumps 3% in Dec causing a $ 500 hike on my monthly paymts. The 2nd one is fixed 12%. The hike is making it impossible for me to make my paymts. I tried to refiance, but I found out that the value of my home has decreased 15 thousand dollars. So my options I feel are only to really struggle with these payments on a house the is not worth what I am paying already or Foreclose. I don’t want to get another loan(Home Equity Line of Credit) to pay off my bills so that I can afford this home, which is what current lender recommends so I can keep paying. I want to Foreclose but I DO NOT want to be Liable for a DEFECIENCY if they don’t get what I owe on it. I was told to avoid that I should try to get the 2nd loan to foreclose first. Is this true? What Can I do so that I will not be liabel for Defeciency if I Foreclose. Plse help if at all possible

  1. Reply
    February 23, 2011 at 12:33 am

    Try to refinance both loans in to one loan. By forclosing on one loan, you stand the chance of losing the condo entirely. Try for a fixed, 5 year arm, interest only and sell it as soon as possible. Hopefully, you will break even!

  2. Reply
    February 23, 2011 at 1:28 am

    I’ve been a loan officer for 5.5 years and could help you with your situation… if you would like email me denielle.hass@americanhm.com

  3. Reply
    Floyd B
    February 23, 2011 at 1:31 am

    Let me put it this way: You are up the creek with out a paddle.

    In fact you don’t even have a boat.

    And if no one throws you a life jacket you are sunk.

    Can you cut back on other spending to come up with the extra money. work more hours or get a second job? Do you have any assets you can sell?

    How much equity is there in you condo?
    Then the only hope you have is if you can control your loss by selling for as much as you can get for the home. If the condo goes into foreclosure it will be worth even less.

    This is what happens when your eyes become bigger than your billfold.

  4. Reply
    February 23, 2011 at 2:05 am

    I can’t advise you on the idea of forclosing.
    Your only options would be to get a new fixed rate mortgage to replace both mortgages you now have.
    I’ll comment here, interest only payments are a poor way to go.
    You have already found out what happens when you buy high and the value drops.
    Your other option at this point would be to declare bankruptcy, and be prepared to lose your condo.
    I saw prices in California (Modesto area) climb a good amount in the 5 years I lived in the area, and now have seen them drop by a small percentage that was enough to put a lot of forclosed homes on the market because people could no longer afford payments.
    As I see it, and I am not a lawyer, your only option at this point is limited.
    If there is a forclosure, you do, if I’m correct, have a liability for any deficiency. Plus you are then out of a home.
    Good luck

  5. Reply
    steve s
    February 23, 2011 at 2:30 am

    If you put yourself in a foreclosure then you are only hurting your credit. What you need to do is ask the lenders if you can pay your loan on a bi-weekly basis splitting your payments into 2. Also, you want to do that with your credit cards and utility bills. It sounds to me that you over paid for a condo which is typical for the California market. You will be held liable for any portion of the deficiency when the lender forecloses on your home. They will sell. The 2nd lender will probably not get paid anything if the first isn’t satisfied.

    You may want to file for a chapter 13 bankruptcy to save your condo from being foreclosed on and also allow you to pay your bills on time.

    If you refinance your home you might want to look at a Pay Option ARM. This program gets you low payments and every year the payment itself goes up 7.5% all the while your interest rate fluctuates. It will give you 4 payment options which you can switch every month. The payment options are a minimum payment, interest only payment, 30-year and 15-year payments. The downside to this program is that if you decide to just pay the minimum payment you will be subject to negative amortization. This is where you might owe more at the end of 5 years than what your original loan amount started at. I always recommend to my clients they pay an extra $ 600-$ 700 per month in a separate check and mark it “principle”. This loan also in the first 3 years allows you to pay up to 20% of the principle without being penalized for it.

  6. Reply
    February 23, 2011 at 2:32 am

    If you are going to get another loan, just focus on the fix loans only. Right now is a high foreclosure, extremely high, I know because it is where is I work. Don’t count on within the next 5 years the prices are going up. You can count on that the highest number of foreclosure has not hit bottom yet. Or look through the web site Ibuyhouses to see what they can negotiate into your favor.
    If you go into foreclosure, you will have “Bankruptcy” on your record for the next ten years and no place to live.

    No ARM, Balloon, or Riders– what paperwork do you think I am dealing with.

  7. Reply
    February 23, 2011 at 3:17 am

    I deal with solving real estate issues like this on a daily basis. Regardless on who forecloses on you, you can get dinged with a deficiency judgement against you. The information you got is not correct.

    Your first step is to see if you can combine the two loans into one. If that fails, see if you can sell the place. I am assuming you don’t have any equity or not enough to sell it, so you might have to do a short sale. The person who does your short sale can ask to have the deficiency judgement waived. Lenders will do this if you can prove financial hardship, but I have a feeling, especially in Chula Vista, they will accept it because they don’t want to own the property.

    Contact me and we can go over the numbers to see what makes sense and what your options are. I am a full service broker that can do loans and real estate and I’m extremely knowledgable in foreclosures.


  8. Reply
    February 23, 2011 at 3:53 am

    Do not worry you are just in the first wave of people that are forcloseing. Sound like you were the last wave of buyers. See if you got the wool puled over your eyes.

  9. Reply
    February 23, 2011 at 4:16 am

    Certainly don’t go through the foreclosure process if you can help it. Going into foreclosure happens when all other options have been exhausted. There are several lenders online that will help you sell your home before foreclosure. You can especially buy yourself time if the notice of default has not been issued. If you have the option to refinance go with that. It will hurt less in the long run.

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