Will walking away turn into an epidemic?

[OldTrader]

Quote from gnome:

I can understand a mortgage being non-recourse if there were 30-50% down (as is common with commercial RE).

But with no money down (or even only 5%) and no recourse in default, what in the world would induce a lender to make such a loan? Sounds crazy.

Perhaps you can shed some light?

Gnome:

Did you read my post about mortgages in California?

A lender who makes a no money down, purchase money loan in California cannot seek a deficiency judgment. Period. That's what the California law states. A lender cannot seek a deficiency judgement on any purchase money loan.

The only loan a lender can seek a deficiency judgment on in California is a non-purchase money loan ie a refinance. BUT, IF they want to seek a deficiency judgement, they cannot foreclose non-judicially via the deed of trust. Instead, they have to go to court to foreclose. That is a 1-2 year process in California. It is very unikely to happen most of the time.

Any loan in California that is foreclosed non-judicially via deed of trust, whether it is purchase money or otherwise, the lender may not seek a deficiency judgment.

Crazy on the lenders part? Probably. But that's the California law. Lenders have all been down this road before...it was the same law in 1990...the last time this happened. Borrowers simply mailed the keys in for their houses, and walked away.

OldTrader

 

[da-net]

Have been trying to keep up with this subprime, ARM, No Doc, etc loan mess that was created by the Fed Reserve System policy of easy money which they appear not willing to cease anytime in the near future

The following quote from a story on MSNBC; http://www.msnbc.msn.com/id/24115651

"He estimates between 750,000 and 1 million bank-owned properties will hit the market this year, or about a quarter of the homes up for sale. In some areas, these properties will continue to slow sales and depress prices further."

No One is talking about what is happening and will continue to happen to those people that bought & paid for their homes that are and will continue to lose value (Supply & Demand) because of this easy money policy of this private corporation.....

Just a thought....Do these people have a legitimate legal complaint that could be brought as a class action against the Fed Reserve System for their actions? If they do, then do other people in other countries also have a legitimate legal complaint against their central banks and or the Fed Reserve?

Any thoughts?

 

[gnome]

Quote from OldTrader:

Gnome:

Did you read my post about mortgages in California?

A lender who makes a no money down, purchase money loan in California cannot seek a deficiency judgment. Period. That's what the California law states. A lender cannot seek a deficiency judgement on any purchase money loan.

The only loan a lender can seek a deficiency judgment on in California is a non-purchase money loan ie a refinance. BUT, IF they want to seek a deficiency judgement, they cannot foreclose non-judicially via the deed of trust. Instead, they have to go to court to foreclose. That is a 1-2 year process in California. It is very unikely to happen most of the time.

Any loan in California that is foreclosed non-judicially via deed of trust, whether it is purchase money or otherwise, the lender may not seek a deficiency judgment.

Crazy on the lenders part? Probably. But that's the California law. Lenders have all been down this road before...it was the same law in 1990...the last time this happened. Borrowers simply mailed the keys in for their houses, and walked away.

OldTrader

Crazy.... Lenders risk default and maybe LARGE deficit just so they can make the fees..... and do this with ZERO downside protection? Damn!

No wonder we're in such a farkin' mess.

 

[MandelbrotSet]

Quote from SteveD:

You are one of the young ones.....

The collectors will visit your town....don't be silly....

Interfering with a bank gets you to the FBI and then you got real problems....

They will take your boat, car, truck and dog..

But, listen guys, they are not after the truly stretched....they are after the guy who just didn't WANT to pay because the value went below the loan balance.....not the guys who CAN'T pay...

PS: I would think anyone working over 20 years would have house almost paid off.....low loan...big equity...

SteveD

There's a new reality TV show about the "Repo Man" who basically does exactly what you're saying here ... these folks never work in groups of less than three though (and they will call the cops or whatever legal enforcement they have to.

Everyone refinanced all the equity out of their hoems a long time ago ...

 

[OldTrader]

Quote from gnome:

Crazy.... Lenders risk default and maybe LARGE deficit just so they can make the fees..... and do this with ZERO downside protection? Damn!

No wonder we're in such a farkin' mess.

Yep...there has never been a lending crisis that the stupidity of the bankers was not at the heart of it. But to make matters worse, why not make this 0 down loan, with no protection legally, to a guy with a history of not paying? LOL!

Now here's the really crazy part. Sell this same loan off to Wall Street. And there, some genius leverages the whole thing up by a minimum of 10-1, and now you see the problem. LOL!

OldTrader

 

[MandelbrotSet]

Quote from OldTrader:

Yep...there has never been a lending crisis that the stupidity of the bankers was not at the heart of it. But to make matters worse, why not make this 0 down loan, with no protection legally, to a guy with a history of not paying? LOL!

Now here's the really crazy part. Sell this same loan off to Wall Street. And there, some genius leverages the whole thing up by a minimum of 10-1, and now you see the problem. LOL!

OldTrader

Quote from MandelbrotSet:

Greed ... that's what fueld the whole debacle.

...

 

[SteveD]

The book "Liar's Poker" lays it all out for you...written in early 80's....very funny book.....


A class action suit against a Fed entity?????? LOL, yea right...


What if banks got very agressive and went after the people who didn't tell the entire truth on the application, boosted the income, didn't mention old debts still unpaid etc etc.....

You know what they call that boys and girls????

Bank Fraud......3-5 in the Federal pen.....

SteveD

 

[timscott]

At the height of the insanity people in my town were agreeing to buy houses for 15 - 20% more $$$ than the asking price, getting the homes appraised at the higher agreed amount. The seller was then giving a credit back to the buyer who in turn would use the $$$ as the down payment on the home. It was sick.

That kind of buyer might walk away as they have absolutely no equity in the home.

I'm kind of intrigued with the fact that the home I bought in 2000 is still worth double what i paid for it, but the US dollar is worth 1/2 of what it was in 2000. So I'm still at square one with "actual" house value.

My savings, however are worth 1/2, and my mutual funds, while up 50% are still down in buying power by 25%.

I didn't participate in wild speculation on housing or mortgage derivatives and feel like I'm getting absolutely screwed

 

[da-net]

Quote from SteveD:

A class action suit against a Fed entity?????? LOL, yea right...
SteveD

I understand some of the points you are attempting to make, but not this one. Perhaps you would be kind enough to elaborate on it further.

 

[gnome]

Quote from timscott:

".. I'm kind of intrigued with the fact that the home I bought in 2000 is still worth double what i paid for it, but the US dollar is worth 1/2 of what it was in 2000. So I'm still at square one with "actual" house value.

My savings, however are worth 1/2, and my mutual funds, while up 50% are still down in buying power by 25%.

I didn't participate in wild speculation on housing or mortgage derivatives and feel like I'm getting absolutely screwed

And HERE'S the reason why..

http://www.nowandfutures.com/key_stats.html