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In most first mortgages, the deal is either you pay or give the house back. If you stop paying and give the house back, you are keeping your end of the deal, so it's not wrong. I haven't done it and don't plan to. Just saying that is what both parties agreed to.
It's only immoral if you can afford it and walk away. You have cash hidden somewhere... Many people did a stupid thing by purchasing a house that they simply could not afford, with mortgage terms that tinker on being criminal. Other people saw their incomes reduced or even eliminated. Many times these income reductions were not their fault, but you have to plan for these type of things. Another words, don't bite off more than you can easily chew. I would prefer that people try and sell the house before walking away.
In most first mortgages, the deal is either you pay or give the house back. If you stop paying and give the house back, you are keeping your end of the deal, so it's not wrong. I haven't done it and don't plan to. Just saying that is what both parties agreed to.
Not exactly accurate. The buyer is borrowing the money with the promise to pay it back, and using the house as collateral in case he or she defaults. The buyer is not buying the house from the bank, so the bank is not "taking the house back". The bank never owned the house in the first place.
If the buyer defaults on the agreement, he or she has broken their promise to pay the bank back for the money that was loaned to them.
It may have been wrong for the banks to lend to people that only have 3.5% or 5% to put down but it is our responsibility to pay back what is owed. We have raised generations to think that you can charge and create all this debt but not do the responsible thing and pay it back. We also have taught that it is OK to pass the blame on someone else
In most first mortgages, the deal is either you pay or give the house back. If you stop paying and give the house back, you are keeping your end of the deal, so it's not wrong. I haven't done it and don't plan to. Just saying that is what both parties agreed to.
Quote:
Originally Posted by FelixTheCat
In most first mortgages, the deal is either you pay or give the house back. If you stop paying and give the house back, you are keeping your end of the deal, so it's not wrong. I haven't done it and don't plan to. Just saying that is what both parties agreed to.
No thats not what both parties agreed too. The borrower agreed to pay back the loan. The lender didn't agree to take the house in lieu of payment.
No thats not what both parties agreed too. The borrower agreed to pay back the loan. The lender didn't agree to take the house in lieu of payment.
First mortgages in non-recourse states have this agreement. The bank has to take a loss if the collateral (house) is worth less than the loan. I don't know what part you disagree with.
From wikipedia:
"Nonrecourse debt or a nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the difference between the value of the collateral and the loan value becomes a loss for the lender."
First mortgages in non-recourse states have this agreement. The bank has to take a loss if the collateral (house) is worth less than the loan. I don't know what part you disagree with.
From wikipedia:
"Nonrecourse debt or a nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the difference between the value of the collateral and the loan value becomes a loss for the lender."
You just said it in your post - "If the borrower defaults..." meaning if the buyer breaks the terms of the agreement. The agreement is to pay back the amount borrowed. Taking the house is the bank's remedy if the buyer breaks the agreement.
In a non-recourse state, the buyer cannot be held responsible for amounts owed over and above what the property is worth, but that doesn't mean that the buyer didn't break the agreement.
First mortgages in non-recourse states have this agreement. The bank has to take a loss if the collateral (house) is worth less than the loan. I don't know what part you disagree with.
From wikipedia:
"Nonrecourse debt or a nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the difference between the value of the collateral and the loan value becomes a loss for the lender."
Are you telling me a foreclosure doesn't appear as default on your credit report in non recourse states?
Why does the foreclosure appear on the credit report as a bad debt or a default if the borrower has met his obligations.
http://en.wikipedia.org/wiki/Default_(finance)
"In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant (condition) of the debt contract. A default is the failure to pay back a loan.[1] Default may occur if the debtor is either unwilling or unable to pay their debt. This can occur with all debt obligations including bonds, mortgages, loans, and promissory notes."
[quote=jdm2008;12189445]Are you telling me a foreclosure doesn't appear as default on your credit report in non recourse states?
quote]
That's a given.
I was stating the "IFs" in the agreement. The "IFs" are the reason for the downpayment, which some lenders were foolish enough not to require and still barely do with so many 3.5% FHA loans today. Where's the morality in not learning their lesson, then leaving the taxpayers resonsible for the next defaults?
My greatest fear is that we are training people-- and our youth-- to think of debt as an imaginary concept. It's immaterial and unimportant. If you fail... well... who cares? It never really existed, right?
At the heart of the matter is the idea of integrity; money has value because of a system of faith in promises that exist from me to you, from organization to organization, and so on up to the very people who actually set the interest rates. In recent years, without question we have lost many links in that chain. Decisions were made by billionaire bankers who have little to no concept of what it is that they are really lending. People have no idea of what it means to actually default.
With the loss of integrity comes the loss of worth. The two simply exist together and are mutually inclusive. I feel no sympathy for people who failed to plan adequately. It is your duty and responsibility to understand the terms of your loans. It's like a second job; life is a second job. When did we no longer have to read the fine print? When were we excused from basic contingency planning?
As an attorney, I see more of this every day than any five people. There's so much blame to go around I don't even know where you'd begin allocating. The only thing I can say is that at the heart of the matter, values were completely lost and decisions were made on virtues other than charity, civility, integrity or honesty.
I hate to sound preachy, but this is what I see every single day. It's the common factor between everything that crosses my desk.
We live in a country where we no longer have to have personal responsibility. It's horrifying to me to read stories like those in the Wall Street Journal-- there was one printed only a few hours earlier of a woman in Washington, D.C. who simply decided not to pay her mortgage. She could afford it. She wasn't budgeting every last penny. She had the cash and the resources and simply decided that it would be easier to default on her mortgage.
The latest round of defaultees are people like that woman. What do they care? They got stuck with a lousy mortgage they agreed to, and now that they could be bothered to actually read the goddamn terms and conditions, they know how unfair the terms were. But no one forced their hands or put a gun to their head when they walked into the mortgage broker's office.
So sod all of them. If you throw yourself on my mercy these days, be prepared to bounce.
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