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Yes, in some cases the Bank can come after you for a 2nd Mortgage even if you’ve Foreclosed or done a Short-Sale on the property.  In the State of California, you are responsible for paying back your 2nd mortgage no matter what if it’s considered to be a “Recourse Loan”.  A Recourse Loan is when you got your 2nd mortgage after you purchased the home.  In other words, if you got your 2nd mortgage at the time you purchased your home, then it should be considered a Non-Recourse loan.  That would mean that if you foreclosed on the property or did a short-sale, the Bank wouldn’t be able to come after you for the balance owed on the 2nd mortgage.  However, if you got your 2nd mortgage after you purchased the home with a Refinance or Equity line of Credit, then it is considered to be a Recourse Loan in the State of California and the bank CAN come after you for the balance unpaid.  Now, I’m not a Real Estate Attorney, and I always recommend you consult a Professional when considering such important matters.  In this case, you should Contact Dan Kehr, with Kehr Law at 619.823.8230 for any questions regarding Real Estate Law.

If you want to side-step any Tax Liability, 2nd mortgage recourse liability, auto lease liability or eliminate all of your credit card debt strategically, then I recommend you call William McDonald with the McDonald Legal Group before you Foreclose or do a Short Sale on your property.  Timing is everything and the timing will be better sooner rather than later.

Hope it helps!

Derrick Evens
Mr Credit San Diego
858.571.0271
AskMrCredit@yahoo.com

A Short Sale is when you sell your home for less than what you owe on it.  This can be great if you need Relief from a large mortgage payment.  There are some tax and credit implications that are important to consider.  For example, if you owe $500,000 on your home and it’s only worth $300,000, if the Bank agrees to short-sale, then you will ultimately get a 1099 for Debt Relief income for $200,000.  This can be forgiven on your Federal Taxes, but don’t expect the financially destitute state of California to necessarily be so generous.  Of course, your credit score will take at least a slight hit for doing a short-sale, but you can really minimize the damage.  Avoiding a 90-day late payment on your mortgage(s) prior to the account being settled in the short-sale could allow you to recover your credit score completely within 6-12 months.  If you’re one of the lucky few who can get a short-sale completed without having to be late on your mortgage, then you’ll only see a small drop in your scores.  This is a far better alternative to Foreclosure, where you are not in control at all and it’s likely your credit score will get buried so far in the sand that it will take years to recover.

TIP: Don’t go 90 days late under any circumstances.  Avoid Foreclosure like the plague.

Derrick Evens
Mr Credit San Diego
858.571.0271
AskMrCredit@yahoo.com

“The Business Decision” is when a family is deciding what they should do about their home in San Diego.  I have these conversations every day and I can always give the Client some great ideas.  A lot of these people are happy with where they live and actually would like to stay put.  However,  being under water by 30-40% would make anyone start to think…

From a Credit Scoring perspective, the solution here is a San Diego short-sale.  It can save your credit by reducing or even eliminating the element that causes all the damage, which is the number of 90-day late payments that make their way onto the credit report.

However, I highly recommend you work with Proven Industry Leaders in the Short-Sale Arena if you’re considering it.  This is why I offer you Peter Middleton of Keller Williams in La Jolla and Gary Kent from ReMax.  Both of these Agents have worked through the last Short-Sale Real Estate cycle and flourished.  Be extremely careful about using inexperienced Agents for your Short-Sale needs.  It could cost you a significant amount of time and money.

Derrick Evens
Mr Credit San Diego
858.571.0271
AskMrCredit@yahoo.com