Here’s a thought that ought to strike fear in strategic defaulters…

What impact does the “partially worthless security” exception (Calif. Code of Civil Procedure section 483.010(b)) to the “non-recourse” status of a purchase money loan (see the conjunction of CCP 726(a) and CCP 580b and 580d)?

If the lender can seek a deficiency – or foreclose judicially, even on purchase money, owner occupied, 1-4 unit loans and collect a judgment that isn’t protected by the 726/580 cocktail, because eh security was “partially worthless” – can the lender negotiate from an even stronger position to get more money from a short sale seller?

I’d urge caution…on both sides.

1 Comment

  • Cid

    I think there are many so called Strategic-defaulters who are getting bad advice from mortgage lenders. They tell a troubled borrower to skip a few payments so they can get short sale status … probably not wise if they truely want to be rid of their woes. By the time the unsophisticated seller/borrowers figure it out, they are recieving forelcosure notices from the banks.

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