Here is a great question I got the other day from an on the ball Realtor. I have told him I am going to research the case law to pin this question. I already have my basic answer but if Indymac were coming after me I would not feel too comfortable with out some case law. I will get to it and report it here as soon as I have time to look it up.
In the mean time, how would like to make the banks argument and who would like to make the homeower's argument. And what does a sold out junior have to do to recover? And, finally what does this case mean if you are attempting to negotiate a short sale in san diego or some other california city?
Is Indymac Bank bluffing?
A home buyer got 80/20 purchase money financing for an owner-occupied single family residence in CA (nonrecourse, right?). The 2nd TD was done by Indymac Bank and its terms were written as a HELOC which started its life 100% maxed out with all the purchase money HELOC funds going to the home seller, none to the buyer/HELOC borrower.
Now, 2 years later, a Notice of Default has been recorded and the property is worth less than even the 80% 1st loan.
Jon Honish with Indymac Bank, the owner of the 2nd TD, tells me their corporate attorneys will pursue a deficiency judgment against the borrower after the 1st TD forecloses. Is he bluffing or is there a precedent supporting this legal argument of which I am not aware?