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Mortgage law experts say the incentive to walk away from a home loan is highest in states that have anti-deficiency statutes, which prohibit lenders from suing borrowers for additional funds after foreclosure. California is one of those states.
These anti-deficiency laws make a huge impact on foreclosure rates because they are basically “get out of jail” cards, said Professor Zywicki of George Mason University in the Washington D.C. area.
The handful of non-recourse mortgages states includes, in addition to California, the high foreclosure states of Arizona, Florida, Texas, and even Washington. The statutes generally prohibit or limit a lenders’ ability to go after the borrowers’ assets to satisfy the unpaid mortgage debt.