Need advice from someone knowlegeable about legal aspects of real estate/foreclosure issues

[Anonymous]

I have a situation with my parents that I could use some advice on. About fourish years ago my parents, who live in CA, found a resort community in another Western state and decided to custom build their "dream home" for retirement. They have never been huge savers - always live for the moment type of people. I don't know the specifics of what they have saved for retirement, but our belief is that it is not a ton. Yet, the continue to spend somewhat extravagantly. They have owned their current house in CA for several years, gone through a couple of remodels and put all their eggs in one basket banking on the fact that they would make a ton of money off the sale of the home which would then help fund their retirement.

So two years while the new house project was well in process, they put their current home on the market for a million plus. Right then was when the bottom really started falling out - especially where they live which is in the central part of the state east of the Bay Area, one of the hardest hit areas in the nation by the burst of the housing bubble. Fast forward two plus years later. The new retirement dream home has long since been completed and the current home is still up for sale (despite the fact that it's a beautiful home itself). The price has now dropped to bare bones for what they can sell it for based on what they owe from loans and such. They are depressed and anxious to retire but can't afford to retire and move while paying two mortgages. There are so many aspects of this situation that have angered and frustrated DH and I that I can't go into here - but I recently received communication from my Mom that they have gotten a moving estimate and are considering just stopping next month's payment on the CA house...in other words, letting it go into foreclosure. As far as we know, as long as my Dad continues to work, they can afford to pay two house payments - they just don't want to keep working and make two house payments.

Besides ruining their credit, are there other ramifications for these actions? They are coming to visit us this weekend and I'd like to be armed with some information to sit down and have a conversation with them to be sure they understand that this isn't as easy of an out as it might appear to them to be, and to discuss possible alternatives. (Sadly, I can assure you they haven't researched or thought about other alternatives themselves or what this really means.) It hit me yesterday that they are like the Wall Street executives who have operated recklessly and now will leave it to others to clean up their mistakes. Of course our biggest fear is that someday this will become DH and I's problem when they run out of money for retirement. I'd love any thoughts or advice from those who are in the know on this stuff - real estate professional, lawyers, financial planners...anyone!

[Anonymous]

i would think the bank can come after their primary residence.

[Anonymous]

OP, sorry I can't offer advice, only my condolences. I would hate to see my parents do this. It's so irresponsible! And, as you noted, you don't know what kind of mess you may have to clean up down the road. Good luck with this!

[Anonymous]

Anonymous wrote:i would think the bank can come after their primary residence.

yes and no. CA is a non-recourse state but banks get 'one-action' against borrower. many banks choose not to because it's usually not worth it, and that's why so many CA-ers are doing it (the infamous jingle-mail).

moral issues aside, best of luck with your parents.