This is a topic I felt has not been discussed much. The government is pushing for home loan modifications hard. The general public is getting the message that this should be tried before foreclosing. At a superficial level this seems to make sense, but in the state of California modifying your original mortgage would be classified as a refinance. Am I correct here?
Then once the new government subsidized loan is modified and these obligations are not met or the owner would like to strategically default the bank now has a recourse loan. The bank can now go after the individual for the amount owed and not just the secured interest. I think California has a statue of limitations of 6 years for debt collection.
This person would then be liable for up to 6 years on this debt if the fail. I am not sure this is so relevant for strategic defaulters as they most likely would not qualify for the loan modification. But many strategic defaults would think the smart thing to do is refinance the loan into a low fixed rate 30 your mortgage. And this falls into the same trap.
What do others think? Are the theories and logic correct here? Or does the borrow have to have a second mortgage to have a recourse loan that the banks can go after?
This is a topic I felt has not been discussed much. The government is pushing for home loan modifications hard. The general public is getting the message that this should be tried before foreclosing. At a superficial level this seems to make sense, but in the state of California modifying your original mortgage would be classified as a refinance. Am I correct here?
Then once the new government subsidized loan is modified and these obligations are not met or the owner would like to strategically default the bank now has a recourse loan. The bank can now go after the individual for the amount owed and not just the secured interest. I think California has a statue of limitations of 6 years for debt collection.
This person would then be liable for up to 6 years on this debt if the fail. I am not sure this is so relevant for strategic defaulters as they most likely would not qualify for the loan modification. But many strategic defaults would think the smart thing to do is refinance the loan into a low fixed rate 30 your mortgage. And this falls into the same trap.
What do others think? Are the theories and logic correct here? Or does the borrow have to have a second mortgage to have a recourse loan that the banks can go after?
Cheers,
Matt
#housing