The answer to this question depends to a large part on whether you live in a state that has consumer protection statutes known as "anti - deficiency" statutes. These statutes are designed to protect the homeowner from being responsible for loans secured by their personal residence when the personal residence is "underwater." An "underwater" personal residence is one in which the principal balance on the loans that are against the property are in excess of the value of the property.
If you live in a state that has consumer protection statutes known as "anti - deficiency" statutes then you will be able to "walk away" from your home should you not be able or willing to continue making payments on it. Such statutes are enacted to prevent a homeowner from being sued by his lender should the homeowner be unwilling or unable to make his home loan payments.
In California, for example, the legislature enacted Code of Civil Procedure section 580b which prohibits a deficiency judgment in the strict sense, i.e., a personal judgment against the debtor. In relevant part the code section provides as follows:
"No deficiency judgment shall lie . . . . . for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price . . . . .or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser."
In layman's terms this means that a homeowner who secures a "purchase money" loan, which means a loan used to purchase his home, cannot be sued by his bank on the loan that is secured by the home.
You will also note that this section only applies to a "dwelling of not more than four families" which in essence means that if you live in and own and duplex, triplex or fourplex, this anti - deficiency statute applies to you.
While strategic defaults are permissible in many states, depending on the nature of the loan and property, you should consult with an attorney in your state to find out if your state has such statutes permitting strategic defaults and whether or not the statutes apply to you.
So if your personal residence is "underwater" in the state like California and it is secured by a "purchase money" loan, you can safely "walk away" from the mortgage and its financial obligation without fear of being sued by your lender.
After making the determination, that you are in an anti - deficiency state, a strategic default is up to you.
Strategic defaults, however, are not without consequences to your credit. It is always best to evaluate all factors and to seek legal advice from a real estate attorney in your state.
Interpretation of anti - deficiency consumer protection legislation can be tricky and I strongly advise that you seek legal advice from a competent real estate attorney in your state before you make any final decision to "walk away" from your home.
If you live in a state that has consumer protection statutes known as "anti - deficiency" statutes then you will be able to "walk away" from your home should you not be able or willing to continue making payments on it. Such statutes are enacted to prevent a homeowner from being sued by his lender should the homeowner be unwilling or unable to make his home loan payments.
In California, for example, the legislature enacted Code of Civil Procedure section 580b which prohibits a deficiency judgment in the strict sense, i.e., a personal judgment against the debtor. In relevant part the code section provides as follows:
"No deficiency judgment shall lie . . . . . for failure of the purchaser to complete his or her contract of sale, or under a deed of trust or mortgage given to the vendor to secure payment of the balance of the purchase price . . . . .or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser."
In layman's terms this means that a homeowner who secures a "purchase money" loan, which means a loan used to purchase his home, cannot be sued by his bank on the loan that is secured by the home.
You will also note that this section only applies to a "dwelling of not more than four families" which in essence means that if you live in and own and duplex, triplex or fourplex, this anti - deficiency statute applies to you.
While strategic defaults are permissible in many states, depending on the nature of the loan and property, you should consult with an attorney in your state to find out if your state has such statutes permitting strategic defaults and whether or not the statutes apply to you.
So if your personal residence is "underwater" in the state like California and it is secured by a "purchase money" loan, you can safely "walk away" from the mortgage and its financial obligation without fear of being sued by your lender.
After making the determination, that you are in an anti - deficiency state, a strategic default is up to you.
Strategic defaults, however, are not without consequences to your credit. It is always best to evaluate all factors and to seek legal advice from a real estate attorney in your state.
Interpretation of anti - deficiency consumer protection legislation can be tricky and I strongly advise that you seek legal advice from a competent real estate attorney in your state before you make any final decision to "walk away" from your home.
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