If the loans were purchase loans for a owner occupied property they are non-recourse loans according to CA state law. Therefore, if he defaults and the bank or loan holder forecloses, they have no right to his other assets to make themselves whole. The lenders for primary residence purchase loans in CA understand the rules, too, so they are just as culpable (unless of course there was fraud on the buyers’ part). Since the guy makes 45K there is a distinct possibility that he may have committed fraud on his application. After all the loan is over 14x his income. This would complicate this situation from a legal standpoint.
If it were me, I would take all things into consideration:
including my assets, potential income in the next few years, likelihood of the property value recovering to the purchase price, etc. I would attempt to map out a way to do the right thing and pay my debt. If, after careful analysis I realize that there is zero or low probability of being able to do so, I would investigate the other options, such as allowing foreclosure and walking away with bad credit for the next 3-7 years. I don;t think there are any refinance options for this guy.
Of course, it would appear that this person is mathematically challenged. A similar analysis of this situation prior to getting a home loan equal to about 14x his income, would have kept him out of this mess.
