Walk away from Mortgage?????

**dwnloom** · 08-05-2010, 10:27 AM

I just read an article on Nonrecourse vs recourse states for walking away from a home mortgage. Can some one explain what this really means? I live in Arkansas. we are thinking about putting home up for sale, however, we will have to put carpet & tile in at 3000 then when/if it sells we will probably owe about 5000. We have lived in our home for 4 yrs but with the economy the prices of homes in the are have not went up....I lost my job in November. I eventually found another but it is in a different state. We are trying to get our family back together and are trying to decide what to do. My daughter is with me now, however, my husband is 4 hours away. We can live on my salary if we didnt have the house payment.....any ideas? We have had several yard sales....we are getting ready to have a huge one this weekend to get rid of most everything else.

Thanks!

**Greebo** · 08-05-2010, 10:32 AM

A non recourse state is a state in which, if your home is foreclosed on, then once the home is resold, the lender cannot come after you for the difference between what was owed and what it sold for.

Example:
You owe $200,000 on the house.
You stop making payments. The bank forecloses.
They sell the house for $150,000.

In a recourse state, you now owe the bank $50,000.
In a non-recourse state, you owe nothing.

Either way, foreclosures are devastating to your credit record.

If you cannot afford the house, your better option is to go for a short sale - where you sell the house for less than is owed, and seek bank approval to accept the deal so that you end up owing nothing. You generally may have to stop making payments on the house before a short sale will be approved, and it's a difficult process, but better for you and your credit history than a foreclosure.

**dwnloom** · 08-05-2010, 10:37 AM

Ok, first - how do you know what your state is recourse or non recourse and second how do you go about asking for a short sale?

thanks,

**Russ** · 08-05-2010, 10:42 AM

Just a copy and paste

These are all the mortgage walkaway trustee sale states, meaning they are non-judicial foreclosure states.

In those states, generally, when they foreclose on you, they cannot pursue you for their financial losses.

Many, such as California, do in theory allow a lender to choose judicial foreclosure but in those cases the lenders only do so if a borrower has significant other assets. This is the "one action" rule that lets the lender either pursue non-judicial foreclosure, at lower cost and less time, or judicial foreclosure that costs more money and takes more time but lets them go after you for their financial losses.

Alaska
Arizona
Arkansas
California
Colorado
District of Columbia (Washington DC)
Georgia
Hawaii
Idaho
Mississippi
Missouri
Montana (as long as non-judicial foreclosure is used)
Nevada - note that the lender CAN get a deficiency judgment (See below)
New Hampshire
Oregon
Tennessee
Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
Virginia
Washington
West Virginia

These are states that also allow non-judicial foreclosure, and/or where non-judicial foreclosure is more common and deficiency judgments can be obtained more easily:
Michigan
Minnesota
North Carolina
Rhode Island
South Dakota
Utah
Wyoming

**Greebo** · 08-05-2010, 10:48 AM

Originally Posted by dwnloom

Ok, first - how do you know what your state is recourse or non recourse and second how do you go about asking for a short sale?

thanks,

Get yourself a real pit-bull of a real estate agent who has lots of experience with short sales. They'll be able to advise you.

Who's the mortgage with?

**Russ** · 08-05-2010, 10:48 AM

Oh, and I found that info here http://www.mortgagereliefformula.com/recourse/

**dwnloom** · 08-05-2010, 10:52 AM

Wells Fargo - its a VA loan

How do you find a short sale real estate agent? Our town is very small

**Greebo** · 08-05-2010, 10:57 AM

Some google results on wells fargo and short sales:

Wells Fargo Short Sales – What You Should Know

https://www.wellsfargo.com/mortgage/...t/altrepayment

Finding an agent who knows short sales is a matter of calling a bunch of real estate agents and saying, "We're looking for an agent who has short sale experience - what's your background with short sales?" and picking the one that you think is the best.

Don't just go w/ the first one you call, either.

**dwnloom** · 08-05-2010, 11:09 AM

I guess I need to say, we owe 152500, the house should be able to be sold for 155000 (others similar in area did), so its not the sale price that will kill us its the agent fees and closing cost and other fees that will be tacked on....

**starsapphire** · 08-05-2010, 12:37 PM

I had to short sale a house 15 years ago. It still trashes your credit but its better than a foreclosure because at least I know I'm truly out from under it. The bank even put a notation on my credit report at the time, something like "settled in full for less than full amount".

I had to write a letter to the bank holding the mortgage telling them my hardship story and requesting a short sale. I had missed payments and I already had a buyer lined up - a contractor wanted to buy the house in order to fix it up and flip it so there was no one waiting to move in. Then I waited for the bank to approve the short sale and my real estate agent handled the rest. Good luck with everything - I know how hard it is.

ETA: looks like you'll only be several thousand $ short. That will work in your favor. The bank doesn't like to do short sales on large amounts.

**ncarr** · 08-05-2010, 03:25 PM

If its so little of a difference I would save up money so you can pay the agent fees etc. I wouldn't put myself through the ordeal of a short sale if you can avoid it.

**NikoSan999** · 08-05-2010, 04:28 PM

Originally Posted by Greebo

A non recourse state is a state in which, if your home is foreclosed on, then once the home is resold, the lender cannot come after you for the difference between what was owed and what it sold for.

Example:
You owe $200,000 on the house.
You stop making payments. The bank forecloses.
They sell the house for $150,000.

In a recourse state, you now owe the bank $50,000.
In a non-recourse state, you owe nothing.

Either way, foreclosures are devastating to your credit record.

If you cannot afford the house, your better option is to go for a short sale - where you sell the house for less than is owed, and seek bank approval to accept the deal so that you end up owing nothing. You generally may have to stop making payments on the house before a short sale will be approved, and it's a difficult process, but better for you and your credit history than a foreclosure.

In a recourse state if you short sale the bank can STILL come after you for the difference. OR they can issue a 1099 C. C for cancellation of debt. After which you have to claim that amount as income on your taxes at the going tax rate for you. But they are all going after the money.

We went thru this with our foreclosure attorney before we filed the bankruptcy. This is from an attorney. Also from our short sale real estate person. The one house was up for short sale. It didn't sell after a year and a half. Both houses went down.

It isn't like it was 15 years ago. They want their money. Even at the start of this in 2008 they were doing 1099 C's..but seldom anymore. Wells Fargo isn't forgiving either. They rank right up there with Bank of Hell. Believe me.

**Syn D** · 08-05-2010, 04:50 PM

A few years ago we had to give up our house, cos' we knew we could longer make the payments and we didn't want to be foreclosed on.. We called the mortgage company, they said, sense we were up to date and good on making our payments, they would work with us.. The deal they gave was, if they sold our home for at least what we owed on it, they would have it on our credit a certain way as to not harm us to much.. Sometime later we checked our credit and they have it on there as fully paid with no special circumstance notated..