Short sale with 2 loans

macunanan · Joined: 08 Aug 2008 Posts: 4 1.00 Dollars($)

4 months behind, my property is in California and is listed for sale. My agent is negotiating for a short sale, but no response yet. But i already moved to an apartment to avoid embarrassment if lender forecloses.

What is the ruling if you have two loans and how will the proceeds will be allocated to satisfy both lenders? If the canceled debt be taxed? Can they run after me if second loan was not fully settled?

Appreciate any response. God bless

Be

larry · Joined: 27 Jun 2007 Posts: 3328 474.49 Dollars($)

Hi macunanan.

Welcome to the forum.

With the sale proceeds the first mortgage lender will be paid first. And after satisfying the first mortgage lender, the second mortgage lender needs to be paid off. If the second mortgage lender is not paid off in full then he can come after you for the deficiency judgment and put liens on your other properties and sell the debt to collection agencies.

But if the outstanding loan amount is forgiven by the lender then you will need not to pay tax on it because of the Mortgage Debt Forgiveness Act 2007

Hope it helps. Feel free to ask if you have any further questions.

Best of luck,
Larry

macunanan · Joined: 08 Aug 2008 Posts: 4 1.00 Dollars($)

Thanks, but in California there is an anti deficiency law? Both loans are secured by the property. Would they still come after me?

sara · Posted: Tue Aug 12, 2008 3:55 am Post subject: RE: anti-deficiency law in CA

Hi Macunanan,

Welcome to the forums.

The anti-deficiency law is applicable in case of purchase mortgages. I guess the second loan wasn't meant for that, isn't it? also, if the short sale proceeds aren't enough to cover the first loan balance, chances are that the second lender may charge off the loan he offered. However, this doesn't mean you won't owe the debt, just that he won't be interested to collect the debt from you. Know more on what credit charge-off is all about .

Take Care

Posted: Tue Aug 12, 2008 8:47 am Post subject:

Thanks Sara. The seond loan was also used as purchase loan (80/20).

larry · Joined: 27 Jun 2007 Posts: 3328 474.49 Dollars($)

Hi Macunanan,

So if this is your primary residence then the lender cannot come after you for the deficiency judgment as California is an anti deficiency state. BTW have you refinanced the loan?

Best of luck,
Larry

macunanan · Joined: 08 Aug 2008 Posts: 4 1.00 Dollars($)

Larry,

I can't refinance because my loan is fixed for 2 yrs. And i can't really pay the mortgage anymore.

sara · Posted: Thu Aug 14, 2008 5:14 am Post subject: RE:

Hi Macunanan,

welcome back.

If it's a piggyback loan, well then then the combined loan will be treated as purchase mortgage. But I still feel the anti-deficiency law will be applicable to the first mortgage because the short sale will be covering the former. also, let me know if you current on the second loan. I guess it depends on the loan on which you're behind.

Take Care

macunanan · Joined: 08 Aug 2008 Posts: 4 1.00 Dollars($)

Yes i am also behind the second loan. Although, my broker is is still negotiating a short sale with the first, when i called in yesterday, 1st lender is recommending a deed in lieu/cash for keys. But when i ask the 2nd lender, they don't accept a deed in leiu. Is this possible?

jenkin7 · Posted: Fri Aug 15, 2008 5:05 am Post subject:

Hello Macunanan,

Welcome back.

The second lender can reject the deed in lieu if they think after selling the property they will not get their money back. How much do you owe to the second lender? I think you will have to pay the second lender the money that you owe to him with a repayment plan. Otherwise he can place a lien on your other properties if you have any.

Ask the community if you have any further questions.

Guest

I have a house that is in foreclosure trying to get a short sale done on it. I also have a 80/20. This house is in California. I moved to Colorado and bought a house. But I was paying on the house in Ca. Will I be taxed on this if it should short sale. Will they put a lien on my house in Colorado? Am I responsible for any debt after the short sale?

Guest

I have a house I purchased in California. It is a 80/20. I lost my job and decided to purchase a house out of state. I still own the one in California and I have the property listed. I am down 3 payments and I was going to go in foreclosure if I did not do anything. I could no longer make payments on both houses. My questions are. Will they put a lien on my out of state house? And will I be taxed for anything? What am I going to be responsible for? Thank you.

helping_user

Welcome Terryg.

Since you have been through a short sale, therefore, you will owe the difference between your loan balance and the sale price of your home. However, if the lender wants to forgive any remaining debt, then that's a different issue. if your debt is forgiven, chances are that you may qualify for tax relief under the California Mortgage Debt Relief Act. Check out how the Debt relief Act applies and the criteria under which you may qualify for mortgage tax relief .

Thanks.

Guest

I never have been through a short sale before.

What you are saying is that I will have to pay the difference from the loan balance and the sale price of the home. If the lender will not forgive the debt. Is that standard procedure on a foreclosure and short sale.

What other ramifications will I endure. Can you give me a list. Will I be taxed on the difference? Will I get a lien on my other property I own? What will the tax amount be?

Will the tax relief work for me if the property is in California. But I live in Colorado?
Thank you,

I am just so worried that I will face many chargers.

larry · Joined: 27 Jun 2007 Posts: 3328 474.49 Dollars($)

Hi Terrygg.

Welcome back. The lender can come after you in case of foreclosure or short sale for the outstanding balance of the loan. If you don't pay it off then the lender can even place a lien on your other properties.

Only if the outstanding balance of the loan is forgiven then you will require to pay tax on the forgiven amount. BTW is your lender forgiving the debt?

Best of luck,
Larry

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