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CA foreclosure law, repercussions of foreclosure

Lake Forest, CA |

I currently have an ARM mortgage and soon the payments are going to double since I have been able to only pay the "interest" payments. I will not be able to make the future payments so with that I will have to foreclose.
My credit rating is currently excellent. Will the government have any lieneancy with credit ratings due to the housing crisis and all the forclosures that are happening?
Q: Can the mortgage company take my investments away from me?
Q: What all can the mortgage company take from me when I do have to foreclose?
Repercussions of a foreclosure?
My home is in Southern CA

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Attorney answers 2


If you fall behind on your mortgage payment the lender can record a notice of default and begin foreclosure proceedings, which will eventually lead to a trustees sale. If the loan is a first trust deed, the lender will end up owning the property, and it cannot pursue you any further. Your liability for that loan will end. It will show up on your credit report and will severly damage your credit rating. If you know you will eventually lose the house to the bank, your credit will be wrecked anyway and you should stop paying the mortgage payment. I hear it is taking most lenders a year or more to complete foreclosure because of the vast number of borrowers in your position. I do not recommend short sale, because the lenders reserve the right to pursue you for any deficiency.

Whether the goverment will take action to help borrowers in trouble remains to be seen. I believe that lenders will show some understanding toward borrowers with foreclosures in their credit history, simply because so many borrowers have suffered the same fate. In fact, many of the lenders themselves have been less than prudent in their own borrowing and lending conduct. Good luck. Richard Boyer, del mar, CA


If your payment is going to double my guess is that you have an option arm...'pick a payment'...
these loans are expected to double the existing foreclosures over the next 2 years with a peak in the latter part of 2009 further driving down the markets by increasing inventory. The lender can only 'take' your investments by means of a short sale, deed in lieu of foreclosure, foreclosure(judicial or non-judicial).

A short sale and deed in lieu must be with your cooperation and participation. A short sale is a negotiated settlement with the lender and can eliminate any derogatory credit and no public record. A deed in lieu will leave a public record and must therefore effect your credit adversely.

Non-judicial foreclosure under the power of sale in the Deed of Trust only requires that you do nothing and allow the process to proceed but the lender gives up their right to personal liability once they foreclose using this statutory scheme.

Judicial foreclosure forces the current owner of the promissory note to appear as an indispensable party theory, to produce the original note, track and trace assignment and recordings, answer claims of predatory lending, violation of process and procedures/disclosures, claims of legal rescission, etc and the possiblity of personal liability limited by CCP580. In addition, lenders dread and hate the resulting right of redemption. The right of redemption allows the prior owner the power to repay the debt and reclaim title within one year of the judicial sale.

If you want to be proactive with your current servicer/lender write a 'Qualified Written Request' = QWR, and ask for an accounting of your payments, the negative amortization, the expected date of recast, your expected payment and as of what date and any other information (like the name/address/contact for the current owner of your note; a copy of the servicing agreement under which they administer your loan).

QWR requires that servicer/lender to contact you within 20 days to advise you as to their expected compliance within 60 days of your request. This is required by RESPA section 6 or statutory damages and attorney fees. They must suspend any reporting of negative credit reporting during this time. They will almost always dispute receipt of the QWR, so proof of mailing is advised.

Question remains: Can you afford the payments if refinanced? Can you qualify for a refinance? How much cash can you accumulate during the 6-12month until foreclosure and eviction? Are you willing to trade the cash accumulation for your credit score reduction and possible court or collection action.