Legal Question in Real Estate Law in California

My daughter bought her first home in april 2008. She paid 156,000 (which was great at the time) it is now down to 106,000. but, more importantly....the area has digressed. she is going to buy another home in a better area and rent out the one she is in now. what are her legal and financial ramifications if the person she rents to backs out of the rental and she can't get it rented and is stuck with two mortgages. I know she can default, but then what happens to her. thanks kathie


Asked on 12/19/09, 10:13 am

1 Answer from Attorneys
Mark Saltzman, MBA, JD Law Offices of Mark E. Saltzman

Assuming that your daughter's mortgage is typical (i.e. a promissory note, secured by a deed of trust), her renting the property will not stop her obligation to make payments, even if the renter defaults. There are a couple of points that your daughter may wish to address. First, if she has a hardship, arising out of the property's decreased value, she may contact the lender for a loan modification. Under the new plan, lenders can decrease the loan payments and even the principal amount. Also, she may need to look at her loan. Some loans are at a lower rate because the property is "owner occupied." With these loans, if the lender discovers that the property is now a rental, the loan could be in default or have an upward adjustment in the interest rate.

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Answered on 12/24/09, 10:27 am


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