In general, loans that are

[HLS]

In general, loans that are originated for a purchase are NON-recourse debt. (1st and 2nds)

Loans that are refinances are recourse debt. It DOESN’T matter if no cash is taken out, it’s still a refi.

If your purchase 2nd is a HELOC, it can get tricky.

PLEASE consult a tax professional if you are involved in a Cancellation Of Debt (COD) situation…

Link to details: http://www.irs.gov/faqs/faq4-4.html