Will my dad lose his house if defaults on the loan and/or line of credit on his other home?

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Will my dad lose his house if defaults on the loan and/or line of credit on his other home?

My dad owes $137,000 on a house he bought over 35 years ago in CA, and owes $200,000 on an interest only home equity loan. The home equity loan was used to purchase a new house in AZ about 5 years ago. The 2 homes are worth less than the loans. My dad is talking about “walking away” from the CA home because he can no longer afford the payments on his limited income. What are my dad’s options? Will he lose his AZ house if defaults on the loans? Is there further information needed to make a determination? Can you refer us to a lawyer if we need more information?

Asked on January 2, 2012 under Real Estate Law, California

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

I suggest that the best way for your father to resolve the situation he has with the California home is to try and sell it as a "short sale" if he owes more on the loans than the home is worth.

In California, there is legislation passed in July 2011 where if a lender accepts any portion on a sale of real property in a short sale situation, the lender cannot sue the owner of the property for any deficiency even if the loan is not purchase money.

I suggest that your father consult with an expereinced real estate attorney concerning the situation he is in and the best way to try and resolve the problem.


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