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If I foreclose on Primary and investment properties, could the banks come after me for the deficiency amount?

01 Apr

My primary residence currently worth $300K, and the original loan on the house was $585K (first for $60K and second for $120K). The purchase price for the property was $585K
I also own an investment property which is currently worth $225K. The loan on the house is $280K (only first loan). The purchase price for this property was $285K

Now, what I did was I took a second home equity loan of 60K from the investment property and put it towards the second loan of the first property (by refinancing into a lower interest loan). This is how the equation looks like now:

Primary residence
Current value:$300K
Loan 1:$460K (Interest only – 5/1 arm to expire in 2 yrs);This is the original loan
Loan 2: $60K (30 yr fixed P+I); (Refinanced loan)

Investment property
Current value:$215K
Loan 1:$280K (Interest only – 5/1 arm to expire in 2 yrs);
Home equity Loan 2:$60K (15 yr fixed P+I);

I cannot afford to hold on to the properties.
My question is, if I foreclose on both properties, what are the consequences. Can the lenders come after me for the deficiency amount. I tried to short sale for last 6 months, with no success.
I live in southern california

 
5 Comments

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  1. Steve D

    April 1, 2010 at 3:10 pm

    Yes, they can come after you in most states. Whether they will or not is a decision the lenders will have to make.

     

  2. golferwhoworks

    April 1, 2010 at 3:19 pm

    yes they will after all you used one to pay on the other. Expect it

     

  3. I Buy And Sell Houses

    April 1, 2010 at 4:17 pm

    First, let’s clarify the terminology. You will not foreclose on the properties. The banks will.

    Second, as the others say, yes, they’ll come after you.

     

  4. Landlord

    April 1, 2010 at 4:57 pm

    Yes, under the circumstances you lined out they will expect you to repay every dime they gave you.

    Because most of this was cash that you took out most bankruptcy judges will not even allow you to include it, they will grant the banks exemptions.

    You will still owe 345k when this is all said and done, you will also owe income tax, but state and federal on that amount.

     

  5. Epreneur

    April 1, 2010 at 4:58 pm

    You can try to save your primary residence. If you qualify for the Hope for Homeowners or any other Hope Now program you can save one home.. You still have options don’t give up just yet.
    http://www.HopeNowMortgages.com or http://www.HUD.gov