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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: James M. Belin who wrote (38338)	8/10/2005 4:28:55 PM
From: carranza2	Read Replies (1) \| Respond to of 110194

I've had a similar conversation with a local developer--no personal guarantee, either. Turning old buildings into condos is essentially risk free as far as he's concerned.

To: James M. Belin who wrote (38338)	8/10/2005 6:49:56 PM
From: Gemlaoshi	Read Replies (3) \| Respond to of 110194

James, I'm not lawyer, but it is my understanding that if the loan documents do not specify a "nonrecourse clause" that the lender always has the right to seek a deficiency judgement if the foreclosure disposal price is less than the loan balance. I'm sure it varies somewhat from state to state, but in talking to some of the local mortgage players, they say that only federally guaranteed mortgages (e.g. FHA/VA) must have nonrecourse clauses. In fact, they laugh that they would be crazy to let these risky conventional loans out the door with a nonrecourse clause in the paperwork!! My understanding is that most of the conventional ARM/IO and subprime loans originated in the last couple of years do not have a nonrecourse clause, and even if the owner mails in the keys "in leiu of foreclosure", he may still find himself with a court deficiency judgement of tens of thousands of dollars per property. As I said, I claim no expertise in this area, but I do think it changes the ballgame from the late 80s when many people simply mailed in the keys and had no further liability. Perhaps "loantech" or others on the board can help clarify this for both of us. Dave