Lots of people put 0-5% down on houses during the boom. Let’s assume she put 5%. On a million dollar house, that’s $50,000. So the original loan amount would be $950,000.
Assuming she was actually paying principal and didn’t have an interest only mortgage, and assuming a 5% interest rate on the mortgage, after three years of payments her balance would be $917,451.41. So even then she’s more than $100,000 underwater.
The situation just gets worse if she had a 100% or more loan to value and/or an interest only loan.
During the bubble, mortgage brokers were practically throwing no-cash-down mortgages at people. As long as they could sell them to other high-finance types who were bundling, securitizing, and slicing and dicing those mortgages into things called ‘tranches,’ and then selling the tranches, there was every incentive for them to keep on doing it.
Today, you’d have a hard time getting away without a decent down payment. But back then? Easy-peasy.
Sure, but it’s still wrong for somebody not to pay their mortgage if they can. It’s legal, because the bank has a remedy, but it’s wrong. It was wrong what that investment group in Manhattan did that Paul in Qatar mentioned, and it’s wrong what this woman is doing. It’s smart what she’s doing, and it certainly makes economic sense. But it’s still morally wrong.
When I heard this story, I thought, “Wow. She’s in finance. She’s really not clever.” For example, she keeps making each payment as late as possible, which means she’s paying the maximum amount of interest.
She said they need “help” from the bank, but it’s rather hard to feel much for her.
But walking away might be the best financial decision. That I won’t quarrel with.
This is the part that I don’t understand. You’ve got a contract between a flesh-and-blood person and a big corporation. Nobody expects the corporation to act morally; pretty much anyone to the right of gonzomax has pretty much stopped even talking about whether what corporations do is moral. But for some reason, people expect the flesh-and-blood person to act ‘morally’ (whatever that means to them) in his or her doings with the big corporation that’s going to make strictly hardheaded business decisions from its side of the contractual relationship.
What I don’t get is, why the expectation that morality requires the flesh-and-blood human beings to tilt the playing field against themselves, to play by a much more restrictive set of rules, in their dealings with the big, impersonal corporation?
That makes no sense at all to me. It’s a bizarre double standard: you shouldn’t do that if you’re a real person, but IOKIYA corporation.
In my opinion, it’s a pretty simple issue. If you borrow money from someone you have an obligation to pay them back. It’s not that you only have an obligation to pay them back as long as it’s to your advantage to do so. It shouldn’t be a matter of weighing the penalties for reneging on a debt against the amount of the debt - you should pay the debt because you agreed to it.
I agreed that if I did not pay he debt, the lender can repossess the collateral. Why is one part of the same agreement subject to morality, but not another? Is it immoral for the lender to evict my family?
I was going to chime in, but Fear Itself makes a better point than mine.
Why is it immoral to give the bank the house, as we agreed to do, but moral to toss children onto the street and charity as the lender and borrower agreed to do? It seems if we can judge the morality of one act we can also judge the morality of the other.
If banks like to play rough and destroy families because it is legal, then they have no claim to mercy when the game goes against them.
It’s not “more legally valid” but it is far more credible.
Do you think there is any doubt whatsoever that these properties are encumbered by a significant debt? Is there any doubt whatsoever that by the time you’re rolling into court and filing affidavits, the homeowner hasn’t made a payment to any bank, note holder, mortgage company, anyone, in a very long time?
Of course no one doubts this. That’s why, in most cases, the courts will accept as credible evidence an affidavit that the creditor in court is the one who has the right to enforce the note. What purpose does it serve to require them to cart out the actual piece of paper signed if there’s no contradictory evidence?
In short, if the homeowner’s affidavit wasn’t so self-serving and non-probative as “the bank is full of shit”, you would have a trial to determine whose claims are correct.
Yes, I noticed the part where mhendo pointed out that California is one of a small number of non-recourse states. That doesn’t change the fact that such things are common in the US.
And yet, despite your absolute certainty on the subject, it has been noted multiple times already in this thread that, in many jurisdictions, you are completely wrong.
and even the other states often have limitations regarding how lenders can pursue the deficiency. In most places, it’s not as simple as saying that it’s just an unsecured loan.
Oh, calm the fuck down, mhendo. I already acknowledged your post. Yes, California is a non-recourse state, but I was responding to a couple of folks who expressed total disbelief that anyone could ever be sued for such a thing. I was trying to fight some ignorance on the subject. Thank you for your contribution.
ETA: I never said it was a simple as declaring it an unsecured loan.
Oh, also, as an add on: (this is based on nothing more than my basic-ish professional knowledge about what is happening with these mortgages)
most of what you’re talking about here with the “show me the note” movement isn’t based on attacking the existence of the debt. notes should almost always be recorded with the county (the mortgages definitely are). they’re asking to show the note to prove that the person in court today is the actual party who has the right to now enforce the debt - i.e. they’re aimed at the subsequent transfers and assignments of the debt obligation (i.e. the original person who loaned you money to buy your house sold his right to collect money from you 360 times to someone else).
homeowners aren’t really going to have much of anything to aver about this.
So a person takes a job making 10 bucks and hour with a 20 mile commute. They’ve made an agreement to work for that company. The agreement being they show up for work and do the job and in return they get a paycheck.
A few years later gas prices have doubled and changes in traffic make it an even longer commute. That person looks at the math and says wow this job isn’t worth it to me anymore I’d be better off somewhere else. I’m going to stop working there.
Do you think that they have a moral obligation to keep working there?
