Tuesday, June 7, 2011

So wrong

Walk away from your mortgage? Time to get 'ruthless'

He stopped making mortgage payments on two homes in October 2009, a condo purchased for $140,000 in 2005, and a house he bought two years later for $265,000. He had occupied the condo until he bought the house, and then rented it out. "I would have kept up the payments, but the condo was appraised for $54,000 and the house, $135,000," said Horton. To keep paying off the homes didn't add up. He could rent a nice three-bedroom home in town for about $1,000 a month, less than half what he was paying for his mortgages, even after rental income.

Posted by mark @ 06:59 PM (4613 views)
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13 thoughts on “So wrong

  • …and yet, so right.

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  • If only it were that easy over here. Fair play!

    Only in America does a homeowner who has completely payed off their mortgage get BOA trying to foreclose on them. lol

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  • Interesting to reflect that it is probably the right of US citizens to walk away from their mortgages with impunity that has caused US prices to fall, while UK prices have stuck fast.

    If UK mortgage holders could walk away from their liabilities in the same manner, the UK market would be also be awash with bank owned property, selling at ever lower prices..

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  • UT – EXACTLY right.

    I also think that if banks are left holding the baby, they’ll think twice about spreading themselves about so much next time.

    Yes, the person who has the loan gets off – but the greater good is BANKS TAKE RESPONSIBLITY. Next time around, they won’t lend to ludicrously.

    Perhaps a new phrase could be: WARNING, FAILING TO DO YOUR MORTGAGE HOMEWORK CAN RESULT IN YOU LOSING YOUR BONUS

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  • if only americans werent so annoying I might be tempted to move there.

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  • Growler,

    Fast forward five years, and where will the US be? Probably saddled with high inflation after the implosion of the dollar, consequently getting used to european fuel prices and also getting used to making stuff again instead of shipping it in from China. But economically on the up, with their housing crisis well behind them.

    – But where will we be..?

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  • Inbreda,

    Wait for a few more QEs from the Fed until the dollar finally capsizes, and there could be some really nice buying opportunities state-side..

    Where to find non-annoying neighbours though? – Tricky..!

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  • I think that they will need to cut spending and increase taxes. Either because of pressure from markets or lenders such as China. I also think longer term, China will not be a low-cost manufacturer for ever.

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  • By ‘walking away’ they have forced prices much lower than over here, but at least the market will become affordable again to the many who were priced out. This is what should happen, new money at lower prices will help the US house price recovery.

    In the UK, those with huge debts and liar loans will not be able to opt out, but by trapping those in debt, prices over here may not fall. The banks will be saved, but then what will happen? First time buyers will still be priced out. I suspect a large dose of social engineering going on here – a ‘housing Spring’.

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  • I think they should change the law that for future loans (they’ll never get through retrospective), it should be not enforceable by law to pursue a mortgagor for more than the market value of the mortgage for private residential or buy to let properties. Right now, the judges help the mortgagees gain judgements over and above market price – so noone walks away.

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  • Growler,

    If someone is in breach of contract, the other party to the contract is entitled to claim all reasonable expenses when recovering their dues.

    However, it would be possible to require mortgage lenders to take all reasonable measures to ensure that their customers could fulfill their side of the bargain, and for negligence in that regard to be allowable as a defence in any foreclosure action.

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  • UT:

    Which is what you could do now if you wanted to have a pop. But the onus in then on the plaintiff, already in financial difficulties, to finance an action in negligence against the might of the bank. Given negligence law is complicated, that’s an expensive game few will take.

    If the damages for breach of a residential mortgage contract were limited to the agreed market value of the secured property, then not only would banks think about loans, they might seek to sell the property for as much as they could since they will get more money back this way.

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  • Growler,

    You cannot at present argue that a lender should have checked the veracity of your claimed earnings, should have required you to have insurance against sickness and redundancy, should have checked that your other financial commitments did not leave you unable to afford the repayments or otherwise stress tested your ability to repay.

    Such catch-all requirements would force lenders to lend responsibly.

    If you impose more specific rules, the lenders will doubtless come up with ingenious ways to get round it..

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