Foreclosure Timing Can Be Important

            The real estate market downturn was a fact of life for several years. There appear to be many homeowners who are still having a hard time making their mortgage payments.  Sometimes this difficulty is due to losing a job.  Sometimes it’s due to other reasons.

Sometimes there’s just no viable alternative for homeowners other than foreclosure.  But even though California is sometimes referred to as a “non-recourse” state, borrowers can still be personally liable following some foreclosure sales.

Borrowers with only a single loan are at risk when they don’t or can’t make their payments.  Single loan borrowers can also be at risk in connection with a short sale.  Borrowers who have two loans are particularly at risk, especially if the second loan is a recourse loan.  In these situations, a borrower can be personally liable for the unpaid balance of the second loan even after the first lender forecloses.  It’s sometimes tempting for homeowners to think that their liability ends with a foreclosure or short sale. But that’s not always the case.  Sometimes the homeowner realizes too late that personal liability may still exist after such a sale as to one or more of the loans secured by their property.

Many homeowners who are having trouble making their monthly payments find it difficult to spend even more money consulting professionals as to what they should do about their financial problems.  But tax and legal issues can result in hundreds of thousands of dollars of borrower liability in some situations.  The law concerning short sales and foreclosure is complex, and the tax consequences of a foreclosure or short sale can be severe.  Homeowners who can’t make their regular payments act wisely when then seek out competent, qualified, and capable tax and legal advice with respect to their inability to stay current on their loans.

Copyright 2017 ROBERT B. JACOBS