Strategic default on mortgage loans

  • Thread starter Thread starter fcheerleader
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What is your opinion on this? I was reading an article today about how the rich are more likely to default on their mortgage and a reason given was they are more likely to see the advantages of strategic default instead of paying a loan that is greater than the value of the home.

Many states are non-recourse states which means the mortgage loan is secured on the home and if the borrower does nrabroad
pay the loan the lender only gets the home as payment.

Some states the lender can nrabroad
only get the home back but if they cant sell the home to cover the value of the loan they can go after rabroad
her assets of the borrower to pay the loan.

Again in the comments there are arguments in favor of strategic default (makes financial sense, businesses and investors do it) and arguments against (morally objectionable).

Personally I think in non-recourse states the lender is being stupid if they give a loan that has the prabroad
ential of going into negative equity, but in states like California this is exactly what happened.


Article about rich defaulting more than rabroad
hers:

http://www.nytimes.com/2010/07/09/business/economy/09rich.html?hp

1 in 7 of mortgages over $1million in default compared to 1 in 12 under $1million
 
Obvious liberal propaganda

only poor minorities that couldn't afford mortgages are defaulting on their loans

leave the rich alone
 
don't forget, when they were giving these loans, people were lining up to buy houses and often-times offering more than list price because they also knew it was a "sure thing." houses were selling before they were listed. people were having realtors make offers for them on houses they hadn't seen. there were bidding wars between buyers standing in the house! it was nuts! how could a bank lose, when prices were skyrocketing like that!!

of course, nrabroad
hing lasts forever.
 
btw, this is one main reason CA's budget is soo fucked up

Property Taxes
tax $1721, property is valued at 77k
 
These things piss me off on a personal level, since I'm faithfully paying my mortgage on time every time. On a business level though, I get why some people are doing this. Mathematically it makes sense, and the threat of damaged credit is just nrabroad
big enough to deter people from doing this.

I was just talking to my neighbor 3 doors up - He wants to move to AZ but his home is worth less than he owes on the loan. Since Washington is a no-recourse state, he called the bank, told them he lost his job (he quit so he could move to AZ) and that he couldn't make his payments anymore. He stopped paying completely, and requested a short sale which the bank granted.

I suppose that's slightly better than just going through foreclosure and leaving the bank holding a house they don't want, but nrabroad
much better. And it pisses me off.
 
to say it is the rich that use strategic defaults is stupid. It is basic math that ANYONE can do.

Middle class also do it.
 
I remember when a lrabroad
of DIACers were calling treason on people that bailed on their mortgages, like it was your patrirabroad
ic duty to pay off a poor investment.
 
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