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Can I Walk Away From My Mortgage?
Tuesday, November 12, 2013
Whether a borrower can engage in a strategic default depends on whether the borrower lives in a state that has consumer protection statutes known as "anti - deficiency" statutes. Anti - deficiency laws are designed to protect the homeowner from being personally liable for loans secured by their residence when the home is "underwater" i.e. " when the principal balance on the loans are in excess of the value of the property
In many states, some form of consumer protection has been enacted by the state legislature. This prevents banks from suing homeowners for deficiencies. These laws typically apply to single family owner occupied residences.
In California, a strategic default is possible because of enactment of Code of Civil Procedure section 580b. This statute which prohibits a personal judgment against the debtor is set forth below:
A typical example of a legislature enactment is California's Code of Civil Procedure section 580b which provides as follows:
In layman's terms this means that a homeowner who secures a "purchase money" loan, which means a loan used to purchase his home, cannot be sued by his bank on the loan that is secured by the home.
Like most states that have such legislation, California limits its anti - deficiency laws to residences i.e., "dwelling of not more than four families." Thus commercial real estate properties do not fall within the consumer protection statutes of most states.
While strategic defaults are permissible in many states, depending on the nature of the loan and property, you should consult with an attorney in your state to find out if your state has such statutes permitting strategic defaults and whether or not the statutes apply to you.
So if your personal residence is "underwater" in the state like California and it is secured by a "purchase money" loan, you can safely "walk away" from the mortgage and its financial obligation without fear of being sued by your lender.
After making the determination, that you are in an anti - deficiency state, a strategic default is up to you.
If you are in an anti - deficiency state and that the anti - deficiency statutes apply to you, you will have the option to simply "walk away" from your home loan knowing that the lender will not pursue you further.
This is an article by attorney Mitchell Reed Sussman. Mitchell is a California real estate attorney specializing in real estate, foreclosure and bankruptcy.
In many states, some form of consumer protection has been enacted by the state legislature. This prevents banks from suing homeowners for deficiencies. These laws typically apply to single family owner occupied residences.
In California, a strategic default is possible because of enactment of Code of Civil Procedure section 580b. This statute which prohibits a personal judgment against the debtor is set forth below:
A typical example of a legislature enactment is California's Code of Civil Procedure section 580b which provides as follows:
In layman's terms this means that a homeowner who secures a "purchase money" loan, which means a loan used to purchase his home, cannot be sued by his bank on the loan that is secured by the home.
Like most states that have such legislation, California limits its anti - deficiency laws to residences i.e., "dwelling of not more than four families." Thus commercial real estate properties do not fall within the consumer protection statutes of most states.
While strategic defaults are permissible in many states, depending on the nature of the loan and property, you should consult with an attorney in your state to find out if your state has such statutes permitting strategic defaults and whether or not the statutes apply to you.
So if your personal residence is "underwater" in the state like California and it is secured by a "purchase money" loan, you can safely "walk away" from the mortgage and its financial obligation without fear of being sued by your lender.
After making the determination, that you are in an anti - deficiency state, a strategic default is up to you.
If you are in an anti - deficiency state and that the anti - deficiency statutes apply to you, you will have the option to simply "walk away" from your home loan knowing that the lender will not pursue you further.
This is an article by attorney Mitchell Reed Sussman. Mitchell is a California real estate attorney specializing in real estate, foreclosure and bankruptcy.
About the Author:
Learn more about anti - deficiency legislation. Visit attorney Mitchell Reed Sussman's site where you can find out all about anti - deficiency and what it means for you.
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