The downpayment requirement for $1M + homes in California is at nosebleed levels.

A total of 18,621 Golden State homes sold for a million dollars or more last year. That was down 23.8 percent from 24,436 in 2008. In 2007 it was 42,506; in 2006 it was 50,010; and in 2005 it peaked at 54,773… Among buyers who got mortgages, the median down payment was 39.4 percent of the purchase price. Bank of America, Wells Fargo and Union Bank were the top lenders for the $1 million-plus homes, according to DataQuick.

Guess what, short sales do not let borrowers off the hook all the time.

Whether banks can and will pursue deficiency judgments depends on many factors, including what state the borrower lives in and whether there’s a second mortgage or other liens. But if borrowers ignore the possibility of deficiencies, it could haunt them….In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms. …Some states, such as California, are “non-recourse” and don’t allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims.

Commercial properties fall into a liquidity trap where a property cannot be refinanced even when payments are current.

Many such deals were structured as so-called “tenant-in-common” ventures, known by the acronym TIC. Often, the TICs took out commercial mortgages that were packaged into commercial-mortgage-backed securities…much of the $223 billion of CMBS debt coming due between now and 2013 is in the form of mortgages of less than $50 million…TICs surged in popularity after the Internal Revenue Service said in 2002 that they could be used by investors to defer capital-gains taxes from the sale of “like kind” properties…If the $14 million mortgage had been held by a bank, it might have been refinanced or modified because the owners were current on their payments when it came due. But the Cherry Road loan, made by KeyCorp, was sold off as CMBS to investors by Merrill Lynch & Co., now part of Bank of America Corp. When the loan matured in April, the owners couldn’t refinance the debt,

Refinancing of bubble era commercial loans is difficult as lenders tighten standards, require higher cash flow and lowering loan to value ratios. Interest only loans have also gone the ways of the dodo. The tightening of standards is a result of the collapse of the loan securitization market. Now that these new loans will end up in the bank’s own books, there’s no wonder why they are hard to get. The easy money days of loan securitization are over.

Five years ago we paid about $13 million with about an $8 million mortgage. It has been cash flowing to us investors, but the loan is due to change from interest only to a higher rate which would wipe out all cash flow to us investors…No new bank will come in and do a 100% loan-to-value loan. They will want cash flow to be 1.2 times the amortized loan payments and you are at 1 times cash flow now.

Here’s another way borrowers can be tripped up by the financial industry.

Codi is based on short-term borrowing costs, which have fallen significantly since the Federal Reserve and other central banks cut interest rates and flooded the economy with cheap money. Cosi includes long-term CDs that are paying higher yields, keeping Cosi elevated above Codi. Wells Fargo doesn’t publicly release the deposit portfolio used to calculate its index.