California and Arizona and a few other states have anti-deficiency statutes for purchase money home mortgages. But most states allow a deficiency when there is a judicial foreclosure. Some states only allow a deficiency if the value is proved up in court.
VA mortgages require the option of a deficiency under federal law. There has been some push by lenders in California to repeal the anti-deficiency statute but as of yet, they have had no luck.
Back in the early 80s when a number of home loans were underwater in the midwest, lenders who previously sought no deficiency started to get and try to collect deficiency judgments. What ended up occurring was a lot of bankruptcies.
Back when I was a bankruptcy trustee, I also saw a number of people who ended up with deficiency judgments resulting after home foreclosures out east. They ended up filing bankruptcy too.
I don't know what the current market will bring and what lenders will decide to do. At least in California borrowers have no worries. (Though there are some exceptions, like fraud and "waste" of the property.) It is interesting that the anti-deficiency statute does not seem to effect the sale of the mortgages on the market.
VA mortgages require the option of a deficiency under federal law. There has been some push by lenders in California to repeal the anti-deficiency statute but as of yet, they have had no luck.
Back in the early 80s when a number of home loans were underwater in the midwest, lenders who previously sought no deficiency started to get and try to collect deficiency judgments. What ended up occurring was a lot of bankruptcies.
Back when I was a bankruptcy trustee, I also saw a number of people who ended up with deficiency judgments resulting after home foreclosures out east. They ended up filing bankruptcy too.
I don't know what the current market will bring and what lenders will decide to do. At least in California borrowers have no worries. (Though there are some exceptions, like fraud and "waste" of the property.) It is interesting that the anti-deficiency statute does not seem to effect the sale of the mortgages on the market.