If I walk away from my mortgaged house, legally what can happen to me?

UPDATED: Aug 2, 2011

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If I walk away from my mortgaged house, legally what can happen to me?

I bought my first home in 2006 at the height of the housing bubble for $222,000. I put no money down and got 2 loans ($165,000 and $55,000) with the first being a 5-year ARM. I was inexperinced and clearly signed a bad loan. Now, 5 years later, my family has increased and is too big for the house (only 1000 sg ft). I can’t sell it because I am underwater (house is now worth $77,000). I bought another home which meet my families needs 2 months ago. For the past 2 months I have been unable to find renters to pay the $1,200/month rent. I am contemplating letting my first home go. I am aware of the credit rating consequences and can accept that. Anything else I need to be concerned with?

Asked on August 2, 2011 California


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

California is a non-recourse state. Meaning, if your home that you bought to live in has an existing mortgage on it that was not refinanced and you lose the home in the foreclosure, the lending institution for the loan cannot obtain a deficiency judgment against you if the home ends up being sold for less that what is owed on it.

Even if your loans are not purchase money on your first home, if the lending institution utilize a non-judicial foreclosure proceeding on your home as opposed to a judicial foreclosure, you would not be subject to any deficiency judgment in California.

The end result would be damaged credit to you but no deficiency judgment.

Good luck. 


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