Another thing to consider is that refinancing may trigger a pre-payment penalty in your original loan. Many mortgages have these.. check your mortgage.
According to him, refi loan is recourse if the lender opts for judicial foreclosure, which cost more.
Actually the correct wording is that a refi is a recourse loan.. period. The lender may or may not exercise judicial foreclosure.. this is up the the lender not the lendee. Judicial foreclosures will trigger the recourse aspect where the debt decides to ‘follow’ you one way or another (loan loss forgiveness w/ 1099, debt collectors.. etc)
2007 relief act allows you to escape the tax on some of the loans with respect to judicial foreclosure and 1099s. I think the window is only 3 years though. Remember, the banks decide whether they are going to pursue for reimbursement or write it off as a loss(1099) after judicial foreclosure. The lendee doesn’t get to make that decision. (another ticking time bomb?)
NOTE: This is important to refi’s that have been foreclosed through judicial foreclosure: if you have not been 1099’d and it went through judicial foreclosure, it is very likely you are still on the hook for the balance.. it wasn’t forgiven. I have been wondering if the banks are holding onto the amount with a plan to collect later(with interest and penalties) and so they don’t have to write the full amount of the loss on the books now. It may get 1099’d later but don’t bet on it. Banks are managing their losses on the books.(accounting games).
NOTE: In California, non-recourse foreclosures do not trigger loan forgiveness taxes. There may be other taxes though.
