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If it were up to me, I'd exempt income up to 300% of federal poverty level from garnishment, but after that, they should be able to take 25% of any income above that amount, for up to 20 years after default or until it is paid off. This way you can't really argue that they were loaned money they couldn't afford to repay. If this still proves unmanageable, they can declare bankruptcy.
People who lost their homes because they could not pay are not being targeted. Strategic defaulters are the target.
Whether the person could really afford the loan or not is not relevant, they signed the contract. The banks have to follow up and attempt to collect these debts, when they write-off debts the IRS and many states will question this when processing corporate taxes, because write-offs result in less money for the government.
If this were true, then the three biggest banks (Bank of America, JP Morgan Chase, and Wells Fargo) would be going for deficiency judgments too. The article states they are not.
Also, it seems like the banks are targeting "strategic" defaulters, i.e. the people that could afford their mortgages but didn't want to keep paying on houses that had lots a huge chunk of their value.
FWIW, I'm upside down on my house, and I briefly considered doing a strategic default, but for various reasons I never got serious about it. You can bet your ass that if I did, I would have talked to a lawyer first and learned that Pennsylvania is a recourse state. That probably would have ended the idea right there.
I considered it too, Blackjack. I thought long and hard about it.
When you sign your name to a legal and binding document stating thereon that you "have read and fully understand all terms and conditions contained therein", then you can't, later, say...."but I didn't understand" or "they didn't explain it to me" or some such nonsense.
You owe what you owe and unless you are willing to file bankruptcy, you have a legal and moral obligation to pay your debts. It doesn't mean you have to like it.
20yrsinBranson
Generally, strategic defaulters understood the terms of their loans just fine.
Businesses fall under different corporate umbrellas. He might have had 15 different LLCs for all you know and only one or two of them might have filed bankruptcy. As for "leaving all the smaller businesses...high and dry" nobody seems to cry when individuals leave banks and mortgage companies "high and dry" by declaring bankruptcy to get out of paying their mortgage obligation.
Just because Donald Trump hires the best attorney's to do all of this within the letter of the law doesn't mean that he doesn't have the exact same rights as every other American to wipe the slate clean if he wants too.
20yrsinBranson
Here's the deal. Society at large works because most people typically do not think outside the box. Traditions are followed and laws respected. I believe the majority of the people in the world behave this way.
This is all good when laws are created to be fair and just.
However, problems arise when laws are created to favor a certain group or class. The human desire to play nice with others means that historically, it takes an immense amount of unfairness before most people would go against the laws. Think about Apartheid or how Jews were relegated to ghettos in Germany in the 1930s. They were all done within a legal framework but completely unfair.
Right now in America, some of us are convinced certain laws treat people with a lot of money differently from those who don't have as much. However, it's hard to be heard among all of you who keep screaming, "shut up and follow the laws."
When will people learn that they must pay what they owe. If you signed a contract with an agreement to pay then you owe that amount. I am against this whole shrugging your shoulders and walking off from your debts. Make the people pay...whenever and whatever they can.
I have zero sympathy for the banks and what they are now doing is is an act of desperation. People who defaulted were allowed to live in their homes for up to 3 years--where were the banks then? I heard of some people who lived for 6 years without paying anything and nobody bothered them. When people attempted to try to sell the homes using short sales, the banks took months to approve--while the home just sat there.
Also, there were many instances where people asked for mortgage modifications and were turned down. Then the banks foreclosed and turned around and sold the house cheaper than the modified mortgage would have been. This is bureaucratic BS. Remember the robo-signing mess?
I have worked a legal position in which we worked with banks. They would lose files and documents left and right and call us for missing documents all the time--sometimes from years ago. They are not run well and the disorganization of their organizations was stunning.
If I don't pay my rent I get a 3 day notice to pay or quit, per the state of California, after which I will be unceremoniously ejected from my apartment. If one does not pay their mortgage they get to live in their home legally for 2+ years free of cost, and then on top of that they complain that the bank is kicking them out or asking for a deficiency judgement. I think delinquent homeowners in this country have got way more than a free ride if you ask me. The sense of entitlement in this country has reached astronomical proportions.
If it were me, I would sue the bank, drag them into court and make them defend their process in which they decided to make a loan to someone who likely did not possess the means to repay it. Or, have them defend financing a loan on a purchase for a property that clearly exceeded a reasonable price.
The very banks who are pursuing satisfaction of these loans never should have made most of them to begin with and need to be held at least equally accountable.
On the first point, there may be a case.
On the second point, market values were what they were, even if inflated. That would be a hard case to win - if three comparables sold for the asking price, no matter how "inflated" it was based on logic, proving they "financed a property that exceeded a reasonable price" would be difficult if not impossible.
Heh, I have a more mixed view. As much as I applaud them going after people who willingly just walked away from debts they could have paid back on the one hand...these banks were very greedy and knew what they were doing on the other.
So overall, I kind of think it's one evil vs. another.
Trying to draw a moral equivalency to justify wrongdoing is not the proper way to look at this in my view.
Don't forget that you and I wind up having to pay for this mess if the original bowers walked away from their responsibilities. Sure I would have loved to live in a multi-million dollar house on the ocean, even for just a few years. However I had enough common sense to know that I could not afford it in the long run. Many ignorantly thought the housing market would continue to go skyward, so they thought they could eventually sell, pay off the loan and also profit.
It was nothing more than greed and stupidity that lead them to live beyond their means.
From what I've taken from the article is that the lending institutions are not going after everyone, just the people who had the means to pay off the loan, but decided against it. Here is a quote from the article that is telling;
Andrew Wilson, a spokesman for Fannie Mae, said the finance giant is focusing on "strategic defaulters:" those who could have paid their mortgages but did not. Fannie Mae analyzes borrowers' ability to repay based on their open credit lines, assets, income, expenses, credit history, mortgages and properties, according to the 2013 IG report. "Fannie Mae and the taxpayers suffered a loss. We're focusing on people who had the ability to make a payment but decided not to do so,” said Wilson.
Don't forget there were many people speculating in the housing market, such as people who bought multiple houses to "flip them". They made plenty of money until the bubble burst, but then did not want to pay their debts having played a risky game, and eventually lost.
Heck I like to go to a casino once a decade or so, bet money and reap the rewards when my luck is running strong. However I also know and accept there is a price to pay if I bet and lose. If the casinos allowed winners to walk out with profits, but also didn't take the money if the players lost the bets, there would be no casinos in business.
When will people learn that they must pay what they owe. If you signed a contract with an agreement to pay then you owe that amount. I am against this whole shrugging your shoulders and walking off from your debts. Make the people pay...whenever and whatever they can.
Your attitude would be admirable but for the fact that the banks themselves were at least partially responsible for this whole mess due to causing the housing bubble with their subprime mortgage loan scams, scams they were barely punished for, if at all. Then they recouped most of their losses via foreclosing on these homes the buyers were never able to afford in the first place. Now they are adding insult to injury by taking more of the former buyers' money, which will end up causing the loss of more homes and possibly more jobs. Great idea!
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