[DaCounselor]

“While HELOCs are recourse, to get recourse the lender has to pursue a judicial foreclosure. Not something likely to happen in California. Once the trustee sale happen it wipes out everything. So unless the HELOC buys out the first and judicial forecloses on the house.. they have no recourse. From a practical point of view, high LTV HELOCs in a declining market in California are non-recourse.”
_________________________________

Yes and no. In this instance it sounds like he is considering paying off a non-recourse purchase money 1st with a HELOC. There is CA case law that suggests a no-cash-out re-fi of a non-recourse loan retains the non-recourse characteristic of the original loan. In this instance, the HELOC may be non-recourse. As an aside, if a HELOC is purchase money it is non-recourse.

A post-purchase HELOC (to pay off CC or buy toys) is a recourse loan and the lender does in fact have recourse even if the 1st forecloses. While the HELOC is “wiped-off” the property, the now unsecured debt still exists and can be turned into a judgment and collected.

[DaCounselor]

“While HELOCs are recourse, to get recourse the lender has to pursue a judicial foreclosure. Not something likely to happen in California. Once the trustee sale happen it wipes out everything. So unless the HELOC buys out the first and judicial forecloses on the house.. they have no recourse. From a practical point of view, high LTV HELOCs in a declining market in California are non-recourse.”
_________________________________

Yes and no. In this instance it sounds like he is considering paying off a non-recourse purchase money 1st with a HELOC. There is CA case law that suggests a no-cash-out re-fi of a non-recourse loan retains the non-recourse characteristic of the original loan. In this instance, the HELOC may be non-recourse. As an aside, if a HELOC is purchase money it is non-recourse.

A post-purchase HELOC (to pay off CC or buy toys) is a recourse loan and the lender does in fact have recourse even if the 1st forecloses. While the HELOC is “wiped-off” the property, the now unsecured debt still exists and can be turned into a judgment and collected.

[DaCounselor]

“While HELOCs are recourse, to get recourse the lender has to pursue a judicial foreclosure. Not something likely to happen in California. Once the trustee sale happen it wipes out everything. So unless the HELOC buys out the first and judicial forecloses on the house.. they have no recourse. From a practical point of view, high LTV HELOCs in a declining market in California are non-recourse.”
_________________________________

Yes and no. In this instance it sounds like he is considering paying off a non-recourse purchase money 1st with a HELOC. There is CA case law that suggests a no-cash-out re-fi of a non-recourse loan retains the non-recourse characteristic of the original loan. In this instance, the HELOC may be non-recourse. As an aside, if a HELOC is purchase money it is non-recourse.

A post-purchase HELOC (to pay off CC or buy toys) is a recourse loan and the lender does in fact have recourse even if the 1st forecloses. While the HELOC is “wiped-off” the property, the now unsecured debt still exists and can be turned into a judgment and collected.

[DaCounselor]

“While HELOCs are recourse, to get recourse the lender has to pursue a judicial foreclosure. Not something likely to happen in California. Once the trustee sale happen it wipes out everything. So unless the HELOC buys out the first and judicial forecloses on the house.. they have no recourse. From a practical point of view, high LTV HELOCs in a declining market in California are non-recourse.”
_________________________________

Yes and no. In this instance it sounds like he is considering paying off a non-recourse purchase money 1st with a HELOC. There is CA case law that suggests a no-cash-out re-fi of a non-recourse loan retains the non-recourse characteristic of the original loan. In this instance, the HELOC may be non-recourse. As an aside, if a HELOC is purchase money it is non-recourse.

A post-purchase HELOC (to pay off CC or buy toys) is a recourse loan and the lender does in fact have recourse even if the 1st forecloses. While the HELOC is “wiped-off” the property, the now unsecured debt still exists and can be turned into a judgment and collected.

[DaCounselor]

“The key is having a stable income in that area and that is going to be bigger assumption than most think it is in the coming years.”
___________________________

I think we are going to see the economy effect alot more people moving forward – salary cuts, or no raise, or job loss, etc, all resulting in increasing pessimism regarding income and stability. You can be looking at a fantastic price on a home with a historically low interest rate, but if you are really concerned about job stability are you going to pull the trigger and buy or are you going to remain in a holding pattern until you feel some stabilization?

[DaCounselor]

“The key is having a stable income in that area and that is going to be bigger assumption than most think it is in the coming years.”
___________________________

I think we are going to see the economy effect alot more people moving forward – salary cuts, or no raise, or job loss, etc, all resulting in increasing pessimism regarding income and stability. You can be looking at a fantastic price on a home with a historically low interest rate, but if you are really concerned about job stability are you going to pull the trigger and buy or are you going to remain in a holding pattern until you feel some stabilization?

[DaCounselor]

“The key is having a stable income in that area and that is going to be bigger assumption than most think it is in the coming years.”
___________________________

I think we are going to see the economy effect alot more people moving forward – salary cuts, or no raise, or job loss, etc, all resulting in increasing pessimism regarding income and stability. You can be looking at a fantastic price on a home with a historically low interest rate, but if you are really concerned about job stability are you going to pull the trigger and buy or are you going to remain in a holding pattern until you feel some stabilization?

[DaCounselor]

“The key is having a stable income in that area and that is going to be bigger assumption than most think it is in the coming years.”
___________________________

I think we are going to see the economy effect alot more people moving forward – salary cuts, or no raise, or job loss, etc, all resulting in increasing pessimism regarding income and stability. You can be looking at a fantastic price on a home with a historically low interest rate, but if you are really concerned about job stability are you going to pull the trigger and buy or are you going to remain in a holding pattern until you feel some stabilization?

[DaCounselor]

“The key is having a stable income in that area and that is going to be bigger assumption than most think it is in the coming years.”
___________________________

I think we are going to see the economy effect alot more people moving forward – salary cuts, or no raise, or job loss, etc, all resulting in increasing pessimism regarding income and stability. You can be looking at a fantastic price on a home with a historically low interest rate, but if you are really concerned about job stability are you going to pull the trigger and buy or are you going to remain in a holding pattern until you feel some stabilization?

[DaCounselor]

With respect to the FFR and USD LIBOR, I feel that we are looking at several years of rates in the general vicinity of where we are now. I think the FFR is going lower before going higher. The USD LIBOR has been and may continue to be more erratic but I believe it will remain relatively low for several years.

[DaCounselor]

With respect to the FFR and USD LIBOR, I feel that we are looking at several years of rates in the general vicinity of where we are now. I think the FFR is going lower before going higher. The USD LIBOR has been and may continue to be more erratic but I believe it will remain relatively low for several years.

[DaCounselor]

With respect to the FFR and USD LIBOR, I feel that we are looking at several years of rates in the general vicinity of where we are now. I think the FFR is going lower before going higher. The USD LIBOR has been and may continue to be more erratic but I believe it will remain relatively low for several years.

[DaCounselor]

With respect to the FFR and USD LIBOR, I feel that we are looking at several years of rates in the general vicinity of where we are now. I think the FFR is going lower before going higher. The USD LIBOR has been and may continue to be more erratic but I believe it will remain relatively low for several years.

[DaCounselor]

With respect to the FFR and USD LIBOR, I feel that we are looking at several years of rates in the general vicinity of where we are now. I think the FFR is going lower before going higher. The USD LIBOR has been and may continue to be more erratic but I believe it will remain relatively low for several years.

[DaCounselor]

We can probably all agree on the list of market conditions that helped form the “perfect storm” in inflating the real estate bubble and ultimately leading many to ask themselves the question “to walk or not to walk?” In my mind, however, the decision regarding walking is much more forward-looking than its opposite counterpart.

Certainly I think there are those that may attempt to justify/rationalize a walk-away by more than just chalking it up to a business decision but by also indicting “the system” for creating the environment that precipitated them putting on their walking shoes. So there is some backward-looking analysis by some. Nevertheless, I have little doubt that the primary issue is forward-looking – ie, “what will happen to me if I walk?” Using this rationale, you can make the argument that it is the non-recourse nature of CA purchase money loans and the historical lack of pursuit of judicial foreclosures/deficiency judgments by lenders as to recourse loans that cinches the decision to walk. Bottom line being that if a borrower was facing not only ruined credit but also a strong likelihood of a judgment against them for six figures, they would have to be more inclined to take that second job, rent out that room, etc, to try and salvage the situation. Recourse (or lack thereof) is THE issue with respect to walking away.

[Author]

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