If I am overpaying on a high interest loan for an upside down house, will the bank be willing to change my rate if I threaten to walk away?

UPDATED: Oct 18, 2011

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If I am overpaying on a high interest loan for an upside down house, will the bank be willing to change my rate if I threaten to walk away?

I have perfect credit and got stuck in a very high rate loan after a divorce. I had all of the qualifications for a loan modification but was refused. I am looking at either walking away completely or a short sale if the bank (PNC) will not work with me. Since I have great credit and have never been late on any type of payment, will they take me seriously when I threaten this? Do I put myself in a bad position by “showing them my hand” with this threat? I don’t want to be irresponsible but this isn’t making business sense.

Asked on October 18, 2011 under Real Estate Law, California


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Before you decide to walk away on the house that you owe more on than what it worth, you need to first confirm whether the loan that you have for it is the original loan for its purchase and not a refinance. If the loan is the original loan, then if you lose the property in a foreclosure, then you would not be obligated for any deficiency since California has anti-deficiency laws.

If you do a short sale and the lender agrees to it, under California law you would not be obligated for any deficiency as well.

I suggest that you retain a real estate attorney to asisst you concerning your negotiations for a short sale for the home or a loan modification.

Good luck.


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