Recourse Loan in California?

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how can you determine whether your mortgage loan is a non recourse loan or a recourse loan In California?

  1. Reply
    Loan Recourse
    April 29, 2011 at 10:58 pm

    “The big mistake homeowners make is turning a “non-recourse” second loan into a “recourse” loan by refinancing it. A non-recourse loan is a loan that the bank can only look to their secured interest.

    So how is a second mortgage a non-recourse loan? Simple, it was “purchase money” for your home. A purchase money loan is one where the money went from the lender, to escrow, and then to the seller or to pay purchase closing costs. In California purchase money loans made on your home (note: not second home or investment properties) are non-recourse. It’s simple as that.”

    Also, it’s California state law. It may not be explicitly written in the loan documents. Check out California Code of Civil procedure section 580b:

    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
    Where both a chattel mortgage and a deed of trust or mortgage have
    been given to secure payment of the balance of the combined purchase
    price of both real and personal property, no deficiency judgment
    shall lie at any time under any one thereof if no deficiency judgment
    would lie under the deed of trust or mortgage on the real property”
    or estate for years therein.

  2. Reply
    April 29, 2011 at 11:13 pm

    Its pretty easy.

    All second loans are recourse.

    The first loan is only recourse if you ever refinanced after the initial purchase. If it is the original loan it is non-recourse and you only pay income taxes on the money you are not repaying.

  3. Reply
    April 29, 2011 at 11:25 pm

    You should check your loan docs you signed at closing. I don’t think these loan docs mention recourse or non recourse loans on your residential mortgage. These terms normally have no meaning or relevance in residential mortgage loans.

    Recourse and non recourse loans are normally made in commercial transactions.

    Say a partnership or corporation would want to purchase an office building. The corporation or partnership is the signer of the mortgage loan. The corporation or partnership would want to have a non recourse commercial mortgage loan.

    If for some reason the corporation or partnership failed to make the mortgage payments, then the lender would not be able to attach the assets of the shareholders of the corporation or the partners in a partnership, thus their personal property, cars and homes could not be attached because the corporation or partnership failed in it’s obligation.

    A recourse loan under the same circumstances the lender would be able to not only go after the collateral signed for in the commercial loan docs, but also the personal property of the partnership or shareholders of the corporation, thus the cars, homes and other personal property would be at risk.

    I hope this has been of some benefit to you,good luck.

    “FIGHT ON”

  4. Reply
    Amber Taylor
    April 29, 2011 at 11:56 pm has everything you need to know about applying for a house loan, online house loan applications, and home loan rates.

  5. Reply
    Kevin Williams
    April 30, 2011 at 12:32 am

    The Recourse or Non-Recourse stature of you loan can only be determined by reviewing your mortgage documents. In the state of California the lender is allowed recourse but they must also file a separate complaint in court to sue for the deficiency. Even though California follows the Non-Judicial Process (out-of-court), the right to sue for deficiency is determined by court decision only. 2nd loans are automatically recourse but can be dismissed and the borrower allowed to walk away from the debt if they follow certain steps. If you need any additional information please contact me directly through Yahoo Answers

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