Recourse and Non Recourse Loans…HAFA And The Short Sale

Posted by on Apr 26, 2010 in Government Bills, Regulations and other news affecting, HAFA Government Program | 0 comments

If you are a homeowner in the state of California you will want to understand the difference between Recourse and Non Recourse Loans.

An example of a Non Recourse loan would be if you purchased the home and did not refinance or take out any type of Home Equity Line of Credit, also know as a HELOC.  A purchase of this type is referred to as a purchase money loan.  Meaning just that, the money that was borrowed was used for the purchase of the property.

Recourse Loans are loans that have been refinanced after the purchase of the property, or a Home Equity Line of Credit taken out on the home.  This type of loan is unsecured, and the lender/bank will most likely release the lien to allow sale of the property but also want to satisfy the remainder of the debt with a promissory note or a settlement amount agreed upon between borrower and lender.

HAFA requires that Recourse loans be released completely by the lender.  The lender is paid up to $6000 for full release of the debt.

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