Q: I am $75,000 upside down and seriously debating either, to just walk away or negotiate a short sale. My friend told me I may have a recourse mortgage, which I never heard of. Can you explain? I live in Missouri.
A: If the debt is recourse, you are personally liable for the debt. So a recourse home mortgage means that if your house is foreclosed or sold short, lender can hold you personally liable for any loss and will try to recover it through a deficiency judgment. A deficiency judgment is the difference between what you owe on your mortgage and the amount your lender will get from selling your house.
With a nonrecourse debt, the loan is only secured by the property, and you are not personally liable for the deficiency. Now, in case of short sale, you may try to negotiate with the lender, to sort of change course, converting your potentially recourse mortgage loan into a nonrecourse debt.
Tags: Mortgage, Recourse Mortgage
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