Thursday, January 25, 2007

"Short Pay" The New Game in Town

When you are headed for foreclosure, there are several different options you can take. Short Pay is one of them. The client gives the bank the house and gets out of the loop. This isn’t where you drive up to the bank and throw them the keys and you’re home free. Here is a link to a good info post on it: Short Pay. There is an effort involved and it could preserve your credit, but that seems rather iffy.

The odd thing here is the concept of avoiding the Notice of Default, the NOD. I brought this up in an earlier article Forclosure vs Bankruptcy. The e-mailer in that article that I quoted gave me a name of an attorney to contact about the thriving Short Pay play. The lawyer never answered my emails so I left most of what was in the email out of the post. The email stated that the attorney had done over 90 of these in the past few months. That’s quite a few.

Question: One lawyer does 90 in a couple of months? Are NOD’s getting a little Passé?

If we go back to my first link, you begin to realize the unfolding problem. There are borrowers out there that have backed themselves into a corner. They can’t get the special deal, the short pay, that others got.

Here is a cut and paste:

• Question: I believe that in California, the loan is secured by the property, so the bank cannot go after your assets to make you pay the remaining balance of the loan.
• Actually, this is a good example of a misnomer in the foreclosure arena. There are no deficiency rights in California for Purchase Money Loans. This is the loan you obtained in order to purchase the property. Once you refinance the property, take out an equity line of credit, obtain a consumer loan that is secured by the property, this rule no longer applies. The lender has the right to go after you in a deficiency judgment, even if a senior lien holder takes the property back and a junior loses his security instrument.

Translation: HELOC or REFI= kiss your whatever good-by!


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