[quote=lifeizfunhuh]I’m an attorney so I thought I would interject something about the perils of refinancing.
In California, there is an “anti-deficiency” law on your primary residence, with your ORIGINAL LOAN. This means that if you suffer hard times and cannot pay your mortgage, you can walk, and the only recourse the lender has is to take the home. They cannot come after you for the difference between what your house is worth and the balance on the note.
If you refi however, you lose this protection. So for example, if your original note was for 500k, you refi, then default, your house is sold at auction for 300k, the bank can come after you for the “deficiency” or 200k. Is that worth a few hundred a month? What is the piece of mind worth that they can only take the house and nothing more? Lots for me thanks.[/quote]
I’m totally on board with this opinion, lifeizfun.
I have seen more than a few borrowers get pursued for a deficiency after “walking away” during the “Gulf War malaise” and in the month/years afterwards. I’ve also seen a handful of (delinquent) borrowers receive Form 1098 from their lenders for the “forgiven portion” of their mortgages in a “short sale.” Just because FF lenders currently have a “moratorium” until 2013 on lender issuance of these forms, this in no way means it will continue.
