Promissory Notes Secured by 'Deed of Trust'

[Screwed11]

My question involves a mortgage in the state of: California.

Please help me. My nightmare has unfolded in the fine state of California.

The husband & I bought a house in 2007, a house that was made affordable only because we went through our City's 'home affordability programs' for first time home-buyers. Our first loan is with CALHFA for about 400K. The City then turned around and subsidized the rest of the purchase price (200K) through three different silent 'loans'. These loans were made through what is called a Deed of Trust and two promissory notes -- and all three documents contain language that makes me fear the worst... that we could still be personally liable to pay the City's loans back even if we lost the house. So, we 'hired' a lawyer and sent her the City's loan documents. She looked at two of the three docs, and never got back to us on the terms that are spelled out in the third document. So much for honesty, and this has added more stress in our lives.

Like most other homes, ours also lost a whooping 225K in the past 2 years.

Anyway, now we're wondering if this would mean bankruptcy on top of the foreclosure. We DO NOT HAVE 200K, we don't even have 5K in our savings accounts.

My question is - can someone PLEASE explain to me the difference between a deed of trust and a promissory note secured by a deed of trust? The first of the three loans made out to us by the City is a deed of trust while the other are are 'promissory notes secured by deed of trust'. It is the two promissory notes that I am most worried about. If these promissory notes are 'secured by a deed of trust', then does it not mean that the only thing the City can get will be the house itself? Or does this still allow the lender (the City, in this case) to hold us personally liable and to come after us personally through a lawsuit to get the loans repaid through wage garnishment etc?

This has become a nightmare to us now. Some days, I just feel like throwing myself in front of a moving truck or train to end this horror story that we got ourselves into. We never expected to become unemployed and lose EVERYTHING as a result -- our house, our meagre savings, our credit worthiness, and MOST IMPORTANTLY, our SANITY AND PEACE OF MIND.

I know I need to go to a lawyer, but we have NO MONEY, no jobs, not much left in savings and were cheated by the lawyer that we did go to! So I just need some GENERAL pointers. There is also language in the documents that states that all three loans will become due and payable upon default of the borrower on any other loans on the property -- we have a first mortgage with CALHFA.

I don't get it... if we do NOT Have the money to make our payments to CALHFA, how on Earth will we be able to repay the City's loans that "immediately become due and payable"? Is it just me? Am I missing something here? If we could pay the City's loans, then why the heck would we default on the CALHFA loan?

My head is spinning and I'm frustrated, depressed and suicidal. Does this mean bankruptcy? Does anyone here have any help / advise / suggestion for me? Thank you so much for taking the time and effort to give me some perspective. I just want out, I just want to be able to sleep at night and be there for my children. I don't want to kill myself over this, is there light at the end of this terrifying tunnel?

[flyingron]

The "deed of trust" is the security instrument. It's what binds the property to the lender in case you default on the loan. The promissory note is the contract between you and the lender that you will pay back the money they laid out to pay for the house.

While I'm sure there are nuances to your situation, in fact, in California, if you get foreclosed on, you do not have to worry about them taking things further out of your hide. If you're not in debt otherwise, you don't need to consider bankruptcy.

[Screwed11]

The "deed of trust" is the security instrument. It's what binds the property to the lender in case you default on the loan. The promissory note is the contract between you and the lender that you will pay back the money they laid out to pay for the house.

While I'm sure there are nuances to your situation, in fact, in California, if you get foreclosed on, you do not have to worry about them taking things further out of your hide. If you're not in debt otherwise, you don't need to consider bankruptcy.

Hi, thank you for responding. We have no other debts, in fact, we had just finished paying our car off right before he lost his job. We are able to live and eat on our savings, but we're running out of money fast. My sister will take us in for a while, but we're worried about the house.

"The promissory note is the contract between you and the lender that you will pay back the money they laid out to pay for the house."


This statement concerns me. Could you please clarify? Is this a personal guarantee of sorts? Does this mean that we will pay back every last dime we owe the City from our future earnings, even if we lost the home? No refinances were made, all three of the City's loans AND CALHFA's first loan are purchase money loans, thank the Lord.

[SChinFChin]

Hi, thank you for responding. We have no other debts, in fact, we had just finished paying our car off right before he lost his job. We are able to live and eat on our savings, but we're running out of money fast. My sister will take us in for a while, but we're worried about the house.

"The promissory note is the contract between you and the lender that you will pay back the money they laid out to pay for the house."


This statement concerns me. Could you please clarify? Is this a personal guarantee of sorts? Does this mean that we will pay back every last dime we owe the City from our future earnings, even if we lost the home? No refinances were made, all three of the City's loans AND CALHFA's first loan are purchase money loans, thank the Lord.

YOU ARE always personally responsible for any promissory notes you signed in your name, so it is already PERSONALLY guaranteed, though the word guaranteed is redundant here. The one type of loan that is NOT is if you took out a commercial NON RECOURSE loan, and all the lender can do in that case is take back the property, and NOT come after you.

NON RECOURSE loans are extremely rare in residential real estate, so if you never heard of it, chances are YOU ARE responsible.

Now if prices plummeted, you can't afford it anymore. and the bank agrees to a short sale, perhaps the balance can be forgiven, though you might still get a 1099.

[llworking]

YOU ARE always personally responsible for any promissory notes you signed in your name, so it is already PERSONALLY guaranteed, though the word guaranteed is redundant here. The one type of loan that is NOT is if you took out a commercial NON RECOURSE loan, and all the lender can do in that case is take back the property, and NOT come after you.

NON RECOURSE loans are extremely rare in residential real estate, so if you never heard of it, chances are YOU ARE responsible.

Now if prices plummeted, you can't afford it anymore. and the bank agrees to a short sale, perhaps the balance can be forgiven, though you might still get a 1099.

All CA loans for purchasing primary residences are non-recourse, under CA law.

[SChinFChin]

All CA loans for purchasing primary residences are non-recourse, under CA law.

Thanks, good to know.