WF strategic default in California

RaymondS

LoanSafe Member
Sep 25, 2013
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Thanks for any advice/help you can give. I Purchased a condo as an investment property in California in 2005 for 360,000K. It was purchased with a 288K (Wells Fargo) interest only loan and the remainder on an interest only HELOC (Chase) on my first residence.
I have not refinanced either loan I used to buy the condo. I feel fortunate that I have good tenants now but I am still losing money as the rent does not cover all of the mortgages, HOA fees, expenses and taxes. The property is presently worth well under $200K and I don't see the point in keeping this property as it will be decades until its worth what I purchased it for and I will be losing money every year I keep it up to then. I had a brief consultation with a lawyer (he didn't examine any documents of mine) who suggested a strategic default on the Wells Fargo Loan and continue to collect rent for a few months before the bank takes the property back. The lawyer advised me that WF cannot come after the home I live in because the loan I used was purchase money for the investment property. He went on to tell me that I will be responsible to pay the HELOC loan because it is secured with the home I live in now and that I should continue to pay the HOA fees and insurance until the bank takes over. He said I don't need to pay the real property tax, and first mortgage.


Does this sound like good advice? My two biggest concerns are that WF comes after the home I live in (it has a good amount of equity) and the hassle the collectors will give me during the foreclosure. I have a young family and would rather they not have to go through the harassment of bill collectors.
 

Evan Bedard

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Loan Safe Mortgage
Aug 26, 2007
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San Diego, California
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The property is presently worth well under $200K and I don't see the point in keeping this property as it will be decades until its worth what I purchased it for and I will be losing money every year I keep it up to then. I had a brief consultation with a lawyer (he didn't examine any documents of mine) who suggested a strategic default on the Wells Fargo Loan and continue to collect rent for a few months before the bank takes the property back. The lawyer advised me that WF cannot come after the home I live in because the loan I used was purchase money for the investment property. He went on to tell me that I will be responsible to pay the HELOC loan because it is secured with the home I live in now and that I should continue to pay the HOA fees and insurance until the bank takes over. He said I don't need to pay the real property tax, and first mortgage.
Welcome and thanks for joining the LoanSafe community.

The attorney has sound advice, you can continue renting out the property until the foreclosure is complete and you'll be able to finally enjoy a positive cash flow for many months. Here in Ca the foreclosure process can easily take 8-12 months to complete. Keep paying the HELOC you took out of your primary residence as well as HOA fees, you can drop real estate taxes as they stay with the property, it's not a personal debt.. A deficiency judgment is not permitted when a lender pursues a non-judicial foreclosure (i.e Trustees Sale) here in Ca, regardless of the type of property foreclosed. (CCP § 580d). Virtually all residential foreclosures in our state go through the non-judicial process.