Legal Question in Consumer Law in California

I am considering allowing my house to go into foreclosure. I am terribly upside down and even though I have applied for a Loan Modification through me lender to lower the payments, the amount that they are willing to lower it by is insignificant. I also have a 2nd mortgage, interest only.

Ideally, I would like to allow the house to foreclose and not have to file bankruptcy but is that possible? Would either the first or the 2nd mortgage holders be able to come after me for the deficiency balance?


Asked on 10/11/09, 10:19 am

1 Answer from Attorneys
Melvin C. Belli The Belli Law Firm

First your lender should have lowered your payments to between 31% and 38% of your gross income. The payment should include principal interest, insurance, taxes, and homeowners fees. This the standard in the industry and what most of the government programs offer if you qualify. As for the second depending on how far underwater your house is you can get a significant reduction in principal.

If you do not want to keep your house at minimum I would suggest that you consider a short sale or deed in lieu of rather than foreclosure. If you do get foreclosed on you won't be responsible for any deficiency on the first but the second could pursue you for their note so that's why it makes sense to try for a short sale rather than just letting it go to foreclosure. In a short sale you will have to make a deal with the second but it brings them to the table and is a good reality check

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Answered on 10/12/09, 1:03 pm


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