Should your rentals are positioned in a non-recourse mortgage state, and if you default about the mortgage, the lender may not sue you for your deficiency when the foreclosure won't generate enough proceeds to the loan.
Non-Recourse States include:
Alaska, Arizona, California, Connecticut,
Idaho, Minnesota, Vermont,
North Dakota, Texas, Utah, Washington
However, each non-recourse state possesses his own anti-deficiency laws that prohibit lenders from seeking deficiency judgments. In a few states, the statues only sign up for certain loan types. As an illustration, in California, the laws only protect the borrowers with all the "purchase money" loans. Consequently the money is employed to acquire the home. Therefore, mortgage refinances will not meet the requirement.
Most states' anti-deficiency statutes also protects only homeowners, which generally mean the properties were occupied as primary residence a minimum of few months before foreclosure proceedings. Better news for Investors or second home owners - some lenders don't pursue judgments completely in non-recourse states. It doesn't really worth resources (attorneys, staff, offices, etc) for lenders to take few investors and 2nd property owners towards the court. Foreclosure or a trustee sale, as rival short sale, might also lower your probability of being sued in non-recourse states. This is also true in "One Action States" (or "Single Action States") which is discussed in many details later.
In summary, you happen to be best protected once your property:
was situated in one of several non-recourse states
was obviously a primary residence
loan was the main purchase loan (not refinanced)
was foreclosed (trustee sale)
The best way forward we can give now's to look for professional legal help that is certainly specific for your state and your situation; And always negotiate away deficiency judgment with your lender before proceeding.
