Can I Walk Away From My Mortgage?
The article is written for the purpose of educating the public on anti – deficiency legislation and whether it is possible to simply stop paying on your real estate loan if is is \”underwater.\”
Whether a borrower can engage in a strategic default depends on whether the borrower live sin 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 is in excess of the value of the property
The first thing you must do is check with a local real estate attorney to make sure that your state legislature has enacted laws that prevent banks from suing homeowners for deficiencies. These laws protect single family owner occupied residences.
A typical example of a legislature enactment is California\’s Code of Civil Procedure section 580b which provides as follows:
\”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 purchaser.\”
In layman\’s terms this means that a homeowner who secures a \”purchase money\” loan ( which means a loan used to purchase his home can not be sued by his bank on the loan that is secured by the home.
Like most states that have such legislation, California limits its ant – 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.
Visit the website http://www.palmspringslitigationattorney.com for more information on this subject.
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.
As you can see, anti – deficiency legislation in the states like California protect a homeowner who has a loan that is secured by a \”purchase money\” loan on his or her personal residence.
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.
Strategic defaults are not without consequences, however, to credit. It is always best to evaluate all factors and to seek legal advice from a real estate attorney in your state.
This is an article by attorney Mitchell Reed Sussman. Mitchell is a California real estate attorney specializing in real estate, foreclosure and bankruptcy. His website is http://www.palmspringslitigationattorney.com
Looking to find the best deal attorney to help you with your strategic default, then visit www.palmspringslitigationattorney.com to find the best advice on strategic real estate defaults.
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