Information You Need
The Information You Need Before Choosing a Strategy
Before an attorney or a servicer can give you reliable guidance, certain facts must be assembled. Gather them now, before you start a process that may be hard to reverse.
You may eventually submit some of this information to the servicer. But you should understand your strategy before sending a complete package that starts a particular review process. Once you submit a loan modification application, for example, a clock starts, and it may not be the clock you want running.
Why We Need This: Non Recourse vs Recourse in California
This is a California guide, and the single most important thing we are trying to determine from your information is whether your loans are non recourse under California Code of Civil Procedure Section 580b, or whether they are recourse loans that could let the bank or a junior lienholder come after you personally for money.
We figure that out by looking at the original loans: whether you moved into the property when you bought it, whether the loans have been refinanced, whether you took cash out, and how many loans are on the property. Each of those facts changes whether 580b protects you or whether you have exposure.
We are also gathering this information to set up your timing. Your leverage depends on where you are in the foreclosure timeline, so the dates and the loan status matter as much as the loan type.
Property Information
- •Property address
- •Property type and number of units
- •Current occupancy (and whether you moved in when you bought it)
- •Estimated value
- •Condition and necessary repairs
- •Estimated selling expenses
Loan Information
- •Current mortgage statements
- •Original loan date and amount
- •Purchase money or refinance
- •Cash taken out during refinancing
- •First and junior liens (how many loans are there)
- •Arrears and foreclosure fees
- •Monthly principal, interest, taxes, insurance, and HOA
- •Fannie, Freddie, FHA, VA, USDA, or other investor
Legal & Foreclosure Documents
- •Purchase closing statement
- •Promissory notes and deeds of trust
- •Refinance closing statements
- •Notice of Default
- •Notice of Trustee's Sale
- •Collection notices from junior lienholders
- •Pending lawsuit or bankruptcy documents
Financial Information
- •Current income
- •Recent bank statements
- •Tax returns, if needed
- •Monthly expenses
- •Assets and available funds
- •Hardship and expected duration
Why the Bank Wants These Items
We will analyze your situation initially as a standard short sale, deed in lieu, or loan modification. Before we can customize a strategy to what you actually want, we will eventually have to fill out the bank's loss mitigation package. The items listed above are generally what the banks ask for in their foreclosure, short sale, and loan modification packages.
Gathering them now means we can review your facts and your strategy first, and then fill out the bank's package in a way that supports the result you want rather than just handing the bank whatever it asks for.
Important Fact: How Was Your Loan Originated?
Whether your loan is a purchase money loan on an owner occupied home (generally non recourse) or a refinance or cash out refinance (potentially recourse) changes almost everything about your deficiency and tax exposure. If you are unsure, find your original closing documents before going further.
The same is true for junior liens. A second mortgage or HELOC can survive a first mortgage foreclosure and pursue you for the full balance. Knowing whether you have one, and how it was originated, is essential.
Is Your Loan Covered by CCP 580b and How Can You Be Sure You Will Not Owe Taxes
When your loan was originated matters enormously. If your loan is covered by California Code of Civil Procedure Section 580b, you generally have a non recourse loan, and that usually gives you the most leverage against the bank. The bank's only remedy is to take the property back, not to sue you for the shortfall.
But remember this: because the Mortgage Debt Forgiveness Act has expired, you still have to make sure that your final result with the bank does not turn a non recourse situation into a taxable event with the IRS. In a short sale, that final result is the approval letter. In a deed in lieu, it is the terms of the agreement.
Do not do a short sale unless the approval letter mirrors California 580b. The approval letter is your result, not just paperwork. A poorly drafted approval letter can create a tax bill you would not have owed otherwise.
You Don't Need to Upload Anything to Use This Guide
Secure document submission comes after you request professional assistance. For now, simply gather the information so you understand your own situation. You can continue through the guide without uploading a single document.
Want This Reviewed for Your Situation?
Every situation is different. Get a free, no-obligation review with John McConnin, California Attorney & Broker.
(858) 324-8855