Suppose you bought the Calif. condo with a 3 yr ARM that was adjusting to an intolerable payment. You refi’d just in time to a 5 yr ARM, still barely affordable-now you lose your job and can pay nothing. So short sale or foreclosure is coming down the track.Some say the refi loan is not subject to the same CA. laws as the orginal. If the refi was only used for actual purchase money-not cash out etc., is that not a purchase money loan, too? Is the scenario any different?
Ima -
I am not an attorney, and suggest you speak with one, however, I believe the home is not purchase money once you refinanced. Foreclosure should not be an option. I believe you can get a much better result for you and the bank with a short sale (that is after you have reviewed all the options of keeping the home) - If you are going to leave the home, then you should live there while the home is sold and details are worked out with the bank. We sometimes get lucky and the bank will waive their rights during the short sale process. We had one just like this yesterday. It depends on the servicer and who the underlying investor is.
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BOB, Certified Distress Property Expert (CDPE) bob@inspiragroup.com
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The term “purchase money” only applies to loans that were used to purchase the property. The theory being that you would not have been able to purchase the property and get yourself into trouble without that lender - therefore they should bear some of the responsibility if things go wrong.
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Obviously that doesn’t apply to the next lender, even if you don’t take cash out.