[americandream]

If the creditors are able to reach you and suspect you have an income source or valuable assets, they may well apply for an order to secure settlement of outstanding debt or institute bankruptcy proceedings. I think a lot depends on individual circumstances.

[mattduke]

$this->bbcode_second_pass_quote('seahorse', 'N')ow, don't give me any moral argument about the moral obligation to repay one's debts, those morals went right out the window with the morality of the banks issuing "liar loans" and issuing credit cards to frickin college students without jobs blah blah blah.

There is no morality out there anymore, only greed and everyone doing what's in their own best interest. Everyone is paying for that now.

[aflurry]

$this->bbcode_second_pass_quote('Tyler_JC', '
')Walk away if you want, but if the home sells for less in foreclosure than the mortgage...

You owe the difference and it could be huge.

Do you really want to be homeless and tens of thousands of dollars in debt?

Talking to your creditors is better than defaulting and running away.

[pup55]

$this->bbcode_second_pass_quote('', 'D')oes anyone know

[seahorse]

$this->bbcode_second_pass_quote('', 'A') successful defense can occasionally be made that if the bank or other institution forecloses, you ask them to prove that they own the mortgage, and they cannot, so they keep off your back for awile until they figure out which Chinese bank actually holds your loan. After all, they cannot foreclose if they do not hold the loan in the first place.

[Ayoob]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('korosten', '.')...
So of course I wonder if they would track us down abroad as well if we stopped paying. Does anyone know ?

Chantal

[seahorse]

As for bankruptcy hurting you? For many, including Donald Trump, its a minor inconvenience. In fact, I know a woman who filed bankruptcy maybe 3 months ago and gave up her house. The bank that foreclosed has now contacted her and is trying to work out a deal to sell her the house again. Times are tough when, 3 months later, the bank is calling the debtor that filed bankruptcy and trying to get her back into the house.

That's why this whole stupid mess isn't going to resolve itself. That's why this stupid rate cuts will not solve the problem. Because the banks are losing their collective asses and not profitable anymore!

[smallpoxgirl]

$this->bbcode_second_pass_quote('NWMossBack', 'A')nother interesting wrinkle is that the IRS will come after you for any difference in what the house sells for in foreclosure, and what you paid for it.

So if you bought a house at the peak of the market for $500k, then walk away when the market value drops to $400k, and the loan is foreclosed and the house sells at auction for $350k, the federal government will consider the $150k to be a "gift" from your mortgage company, and you will owe taxes on it!

[cube]

$this->bbcode_second_pass_quote('smallpoxgirl', '.')..
$this->bbcode_second_pass_quote('cube', ' ')All joking aside. I'm not an expert but I honestly believe it is best to work within the legal system. The law is the law. "Walking away" is illegal and therefore would technically make you a fugitive.

[seahorse]

Cube, did you read anything I just posted above?

A bank can choose a nonjudicial foreclosure (meaning, don't have to go to court) or go with a traditional foreclosure - meaning sue the debtor in court.


This is important, so understand -

Non-judicial means the mortgage company cannot go against the debtor personally, they can only foreclose against the property. The debtor gets off scott free. Why would they do this? For several reasons -

(1) Non-judicial a heck of a lot cheaper - very little attorney time involved, no filing fee costs; If you file a suit in court, it will costs thousands in attorney's fees;
(2) Non-judicial is a heck of a lot faster, usually house back in their possession within 90 days as opposed to at least 6 months;
(3) If the mortgage company files a lawsuit against the debtor, at a minimum, the debtor gets pissed and tears up the place plus, if they can't pay the mortgage payments, they are usually close to bankruptcy, so if filing suit against them just pushes them into bankrutpcy and the mortgage company is out all the time and expenses it just incurred to get the personal judgment.

So, in short, there are lots of big debts on big houses being written off, thus we have this financial crisis Cramer is raving about. As the banks are forced to write off more and more bad loans, they are forced to increase more and more reserves, meaning, they can't loan out as much, meaning, they can't lower rates enough to get out of this mess, bc the amount the can lend at any rate is dropping, so we can't get rid of all this excess in the housing market.

Maybe millions of Chinese will come over and the Bank of China will loan them money to buy up all these unsold houses and houses in foreclosure, but seeing how China is forming its own special subprime reaction team to deal with the subprime fallout hurting their banks, I don't think this is very likely.

[url=[url=http://www.marketwatch.com/news/story/subprime-crisis-cool-china-growth/story.aspx?guid=%7BA817A470%2D29CB%2D4EAD%2D9BA8%2D46812DBD697B%7D]http://www.marketwatch.com/news/story/subprime-crisis-cool-china-growth/story.aspx?guid=%7BA817A470%2D29CB%2D4EAD%2D9BA8%2D46812DBD697B%7D[/url]]Chinese subprime special reaction team[/url]

THIS IS THE PROBLEM, A PROBLEM CAUSED BY BANKS THAT HAVE BAD LOANS, ITS A VICIOUS CREDIT CYCLE THAT CANNOT BE CURED BY LOWERING SHORT TERM RATES.

Bernanke is taking a play from Greenspan's play book to try and inflate our way out of this mess, but once the vicious credit cycle crunch starts, I don't see how we can reinflate out. The handle on the toilet has been flushed, and we are all going down with the rest of the turds.

When Bernanke gets down to where Greenspan was, and realizes its not working, he will look at Japan's old 90s play book and continue to lower rates down to almost 0%. When that doesn't work, everyone will finally realize we have a deflationary spiral.

Sure, many debtors will walk away and their debts be written off, but we will all suffer for it.

[ki11ercane]

$this->bbcode_second_pass_quote('joeltrout', '')$this->bbcode_second_pass_quote('NWMossBack', 'I') have also read that you may be liable for some legal fees incurred by the mortgage company. You have to read ALL the fine print in your mortgage agreement.

[jedinvest]

Googled this after reading this thread: Someone said that a refi can still be a Purchase-money loan (I presume, if you don't take cash out) and the second can be handled separately from the first. Anyway, interesting stuff that you really never wanted to learn about, but will reluctantly become familiar with.

(Did I already tell everybody how I have a relative who has just became a real-estate magnate with no significant assets other than other properties. I just hope the expression 'going for broke' doesn't turn out literally for her, bless her soul.)

L.A. Land: Walking Away

[mattduke]

$this->bbcode_second_pass_quote('', 'I')n some jurisdictions, mortgage loans are non-recourse loans: if the funds recouped from sale of the mortgaged property are insufficient to cover the outstanding debt, the lender may not have recourse to the borrower after foreclosure. In other jurisdictions, the borrower remains responsible for any remaining debt.

[Twilight]

$this->bbcode_second_pass_quote('mattduke', 'I')t seems to me the existance of "bankruptcy protection" can only encourage the taking on of risk amounts of debt. I wonder how the the housing bubble would be different if people knew a breach of contract would land them in a labor prison.

[mattduke]

$this->bbcode_second_pass_quote('Twilight', 'P')sychology is fundamentally at fault

[aflurry]

$this->bbcode_second_pass_quote('mattduke', '')$this->bbcode_second_pass_quote('seahorse', 'N')ow, don't give me any moral argument about the moral obligation to repay one's debts, those morals went right out the window with the morality of the banks issuing "liar loans" and issuing credit cards to frickin college students without jobs blah blah blah.

There is no morality out there anymore, only greed and everyone doing what's in their own best interest. Everyone is paying for that now.

[Chesire]

Just walk away you won't be alone . By the time the courts get to you, the stack of cases in front of you will be mind bogglingly long.

Ask for counsel or a delay and right back to the end of the line you go ).

Maybe your upright honest neighbors will start burning the places to keep the riff raff out and you will get lucky ).

[I_Like_Plants]

We're heading toward Great Depression levels of insolvency in the US, so yeah I'd walk away. The typical US'ian takes pride in being responsible and hardworking and will work their ass off to keep their depreciating house though. Then they'll have something medical happen to them and their whole world will crumble anyway. That's the most typical reason for bankruptcy in the US, something medical then you can't work and that's it, either move back in with the parents if you're lucky or you go live in a cardboard box.

Once you walk away and owe debt, you're basically on the shit list. This used to be a bad thing, now we're going to have so many people in this situation that it won't be anything remarkable.

I would advise anyone reading this to get used to, NOW, living on an all-cash basis, living very frugally (your diet will probably actually improve) and getting out of all the debt possible. Also try to develop a hobby or interest to put some fun into life and also it may be something you end up living on once the "real" jobs go away.

The best way to defy the system is to live without their money, their debt, their chains.

[Kez]

People don't really "walk away", they simply don't pay and hold out for as long as they can until kicked out. This is all planned out to get as much for free while they can. They don't declare bankruptcy, but the foreclosure screws their credit for 7 years as if they did.

And like others have said, the banks don't chase most people down because they need lawyers to get that cash back. If someone can't pay their payment now, chances are that it's going to be hell to get anything out of them with a lawyer or not. My coworker declared bankruptcy twice over 10 years and knew all the tricks to keep from paying people even though they had lawyers.

[Tyler_JC]

For the most part, people on this board have fixed rate mortgages, right?

And they haven't taken out HELOC after HELOC, right?

So why all the discussion of walking away from our homes?

Just saying...