Alamo Town Hall MeetingLast evening I attended a “town hall” meeting at the Woman’s Club in Alamo. The program was sponsored by Fidelity National Home Warranty with Shannon B. Jones, of the Shannon B Jones Law Group. as the special guest speaker. The purpose was to discuss some of the options available to home owners upside down on their mortgages and ramifications regarding short sales and foreclosures. The room was filled to the brim, and it would appear there is a great deal of confusion regarding the subject of a short sale.

Ms. Jones did not recommend a foreclosure over a short sale or vice versa, because as she discussed everyone’s circumstances are different. What she did discuss was the difference between a non-recourse and a recourse mortgage.

  • Non-recourse loan – California is a non-deficient State – non-recourse mortgages. If the mortgage is the original purchase money loan (no refinance),  there is nothing the lender in 1st position can do.
  • Recourse Loan – the lender has the choice to do nothing, file a suit with a judicial foreclosure or non-judicial foreclosure which is a private foreclosure sale

For anyone who have 2nds on their homes, in most all instances these are recourse loans and the lender in second position has the right to sue the borrower to pursue repayment of the loan  after either short sale or foreclosure.

Most of what was discussed were generalizations and not specific to any particular case. In order for anyone to guide a homeowner as to any ramifications as the result of a short sale or foreclosure,  the original documents need to be reviewed to determine what the promissory note states.

Questions were brought up regarding tax consequences from 1099’s issued by lenders. The answer was “check with a CPA who specializes in real estate”.

It was also noted that some lenders are relaxing on the requirements for a short sale due to the sheer numbers of “upside down mortgages” .  It may be that the lenders are coming to the realization that a foreclosure is more costly and time consuming than a short sale.

The bottom line if you are uncertain what you should do – seek the advice of your attorney and CPA.

About Linda Urbick Linda

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