Joe Wilson's Silicon Valley Real Estate Blog

Currently, if a homeowner defaults on a purchase mortgage (a mortgage used to purchase their home), the homeowner’s liability on the mortgage is limited to the property itself.  While this law has helped protect borrowers since its inception in the 1930s, it does not extend the same protection to loans that refinance the original purchase debt—even in cases where the loan was refinanced to achieve a lower interest rate. So, if you default on your re-fi'd home mortgage and the bank forecloses, the bank can come after you personally for any difference between what was owed on the loan and what the bank obtained from selling the home at the foreclosure sale.