# What do you think of lenders pursuing deficiency judgments against defaulting homeowners? **URL:** \ **Category:** Great Debates\ **Created:** [October 3, 2011, 7:22pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467 "2011-10-03T19:22:37Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [October 4, 2011, 4:10pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/61 "2011-10-04T16:10:32Z")
> [@magellan01](#): > > I don’t see what is so difficult to understand, but: > > …therefore, the blame lies with them. As opposed to the person who gave them a huge loan that they’d never be able to repay, and then sold that loan to someone else as a “secure” investment? That person is blameless? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 4, 2011, 4:10pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/62 "2011-10-04T16:10:40Z")
> [@Shodan](#): > > it probably isn’t the fault of the lender when that person gets into trouble… Who is in more trouble, the fool who borrows more than he can afford, or the fool that loans it to him? ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [October 4, 2011, 4:13pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/63 "2011-10-04T16:13:11Z")
> [@Saint\_Cad](#): > > Ever since this real estate bubble popped, I have been on the side of the banks and yes, my girlfriend and mother both lost their homes. Yeah, because bankers don’t have special expertise in lending and real estate. Or professional standards to meet and uphold. They’re just regular joes, really, writing loans to everyone as they are obligated to by, you know, stuff …they have no responsibility at all to make sure the loans are sound. Silly idea! ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [October 4, 2011, 4:18pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/64 "2011-10-04T16:18:18Z")
[QUOTE=Fear Itself] Who is in more trouble, the fool who borrows more than he can afford, or the fool that loans it to him? [/QUOTE] It depends on the amount of the loan relative to the assets of both, obviously. Regards, Shodan ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [October 4, 2011, 4:18pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/65 "2011-10-04T16:18:40Z")
> [@Shodan](#): > > And it’s liberalism’s duty to supply those people. 😃 ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [October 4, 2011, 4:20pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/66 "2011-10-04T16:20:15Z")
> [@magellan01](#): > > Don’t you think that the desire or necessity one might have to read all the legalese syncs up with the potential downside of not reading it. Certainly, a document that is entering you into a deal where hundreds of thousands of dollars are at stake, something so big that you’re making it part of your life for thirty years, would be at the top of the list, would it not? I am simply establishing that there is already ample precedent for people not reading long legal documents. I can see the loan officer saying, "Yeah, it’s a long legal thing, but it’s a standard legal document, just like the ones that come when you install software on your computer. ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [October 4, 2011, 4:22pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/67 "2011-10-04T16:22:13Z")
> [@Shodan](#): > > And it’s liberalism’s duty to supply those people. > Therefore [ul] > [li]it probably isn’t the fault of the lender when that person gets into trouble, and[/li][li]Laws based on the presumption of normal or near-normal intelligence aren’t going to help[/li][/ul] > > Regards, > Shodan Are you saying most Americans have below normal intelligence? ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [October 4, 2011, 4:23pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/68 "2011-10-04T16:23:44Z")
Nah - too easy. Regards, Shodan ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [October 4, 2011, 4:25pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/69 "2011-10-04T16:25:19Z")
> [@Frylock](#): > > I’m glad you answered the question because that’s not what I thought you were going to say. Out of curiosity, what did you think I was going top say? > [@Frylock](#): > > I don’t see how your inference here is supposed to work though. The most plausible reading is that you’re assuming something like this: > > F: “When a fool is involved in a transaction, and there are negative consequences of that transaction, the fool is the one who is to be held responsible for those consequences.” I think it is important to make a distinction here. The important thing in what I said is not so much that the person was a fool, generally, but that he was a fool in this particular instance, in a way that was directly tied to the unfortunate outcome. > [@Frylock](#): > > Are you talking about moral issues or legal issues here? Blame is a general moral concept, not just a legal one (and foolishness is certainly not a legal concept–though for many it has moral connotations) but here you use legal-sounding phrases like “malfeasance or fraud” and talk about “the fullest extent of the law.” So am I to understand you as speaking purely about legal matters here? Or by “blame” above did you mean moral blame? I was talking legally. as I thought was indicated by “to the fullest extent of the law”. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [October 4, 2011, 4:27pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/70 "2011-10-04T16:27:36Z")
> [@Evil\_Captor](#): > > I am simply establishing that there is already ample precedent for people not reading long legal documents. I can see the loan officer saying, "Yeah, it’s a long legal thing, but it’s a standard legal document, just like the ones that come when you install software on your computer. And if someone follows that advice, he, or she, is an idiot. You might as well talk about the risk of pulling the tags off your mattress. ---
**Author:** ![Frylock](https://avatars.discourse-cdn.com/v4/letter/f/ce7236/32.png) [@Frylock](https://boards.straightdope.com/u/Frylock)\ **Post date:** [October 4, 2011, 4:31pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/71 "2011-10-04T16:31:32Z")
> [@magellan01](#): > > Out of curiosity, what did you think I was going top say? The same thing someone else upthread said–that the fool deserves what he gets. (Which for all I know you may also think, but it’s different from what you said.) > [@](#): > > I think it is important to make a distinction here. The important thing in what I said is not so much that the person was a fool, generally, but that he was a fool in this particular instance, in a way that was directly tied to the unfortunate outcome. So you think that someone who is intelligent in most contexts, but stupid in a particular context, deserves the blame for negative fallout from the latter context–though someone who was stupid in all contexts wouldn’t deserve the blame in the same situation? Why does being stupid in one context but not another imply that one should be blamed for negative fallout relative to that context? To cut to the chase, it sounds like you’re approaching a claim that the person “should have known better” but I always find that claim to be difficult to understand. How do you know when someone “should have” known better? And why is it that blame attaches to what one “should have” known rather than to what one actually _does_ know? > [@](#): > > I was talking legally. as I thought was indicated by “to the fullest extent of the law”. Then what do you take to be the legal significance of your concept of “a fool”? ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [October 4, 2011, 4:44pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/72 "2011-10-04T16:44:34Z")
> [@Evil\_Captor](#): > > Do you read the TOS on every piece of software you install on your computer, from top to bottom? No. First of all, there are no “blank spaces to fill out later” on TOS. Second, that piece of software costs me, at most, what - $50? $100? Not $300K or so. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [October 4, 2011, 4:47pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/73 "2011-10-04T16:47:31Z")
> [@Shodan](#): > > And it’s liberalism’s duty to supply those people. > Therefore [ul] > [li]it probably isn’t the fault of the lender when that person gets into trouble, and[/li][li]Laws based on the presumption of normal or near-normal intelligence aren’t going to help[/li][/ul] > > Regards, > Shodan But Shodan. If I lend $300,000 to my friend Ratso, and he goes down to the track and bets it all on a promising filly, and loses it all, who is the bigger fool–me, or Ratso? Ratso may be legally obligated to pay me back, but the problem is, he doesn’t have the money and he ain’t never going to have that kind of money. So how the hell am I supposed to get $300,000 from a guy like Ratso? The difference between a mortgage, and my loan to Ratso, is that the mortgage is secured by the house. That is, if Ratso can’t pay me back, I can foreclose and get the security. That is, the house. Except, what if the security is worth a lot less than the loan? If Ratso comes to me with a violin with “Stadivarius” scrawled on the back, and I accept that as security for my loan, and then I find out that the signature was written with a sharpie, then it turns out that my loan to Ratso wasn’t secured after all. The violin is worth $50, not $300,000. It seems to me that there’s a limit to how far the government should protect people who make loans to idiots. It seems to me that a lender who doesn’t bother to perform due diligence before making a loan doesn’t deserve much protection. Especially if I’m supposed to be some sort of professional loan-giving-guy. Shouldn’t I be expected to know better than to loan money to Ratso? And when Ratso blows the money, how much should I expect you to help me get my money back? ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [October 4, 2011, 6:03pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/74 "2011-10-04T18:03:23Z")
The lenders, not the borrowers, came up with a variable mortgage. You carefully calculate the monthly payment and see what you could afford. For a long ,long time the rates stayed flat. You could count on the payments staying the same. But there was danger in getting in one. Millions took them and did fine. The lenders also explained that your home value was going up, Your home would be worth so much more that you could refi in the future and get a pocket full of money. For a long time it was true. It was a great selling point. The home values were highly inflated. That was no secret, but next year it was worth even more. The year after ,it was the same. The lenders came up with phony home evaluations .The lenders came up with faking income on the documents. The mortgage company gave you a person to deal with who was an expert in mortgages. Home owners trusted a person with experience and credentials. Just like people accepted Greenspan as an expert, the borrower trusted the pros in the business. Mortgages and credit card agreements are overly complicated in order to obfuscate . The borrower really does not understand his vulnerabilities and relies on the lender to provide him with an honest appraisal… Many got taken. But of course they are not as smart as you guys. So i suppose people not well versed in economics are just fair game to bankers. We should not help them. We should help the lender who created this mess. Elizabeth Warren was trying to simplify both mortgages and credit card agreements so they were easier to understand. She was attacked ruthlessly . She was not even able to head the organization she started. We know where the power is ,don’t we? ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [October 4, 2011, 6:24pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/75 "2011-10-04T18:24:03Z")
What I am having trouble with in this debate are the Dopers that excuse people for being idiots. These same people that were misled by mortgage brokers are the same people who you laugh at when they give money to help a Nigeran minister clear funds out of his country. Let’s make this simple. You bring home $3000 per month and a person offers to lend you money for a home that you have to pay back at $2000 per month. Do you take the deal? If you do, whose fault is it that you now have a loan that you cannot afford. I think the issue that underlies all of this is that the banks are not going after people who lost their homes and are now renters for the next 7 years. They are going after people who gamed the system by pulling equity out and letting their house foreclose/go short. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [October 4, 2011, 6:40pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/76 "2011-10-04T18:40:50Z")
> [@Saint\_Cad](#): > > You bring home $3000 per month and a person offers to lend you money for a home that you have to pay back at $2000 per month. Do you take the deal? If you do, whose fault is it that you now have a loan that you cannot afford. You have $400,000 in the bank and a person who takes home $3,000 per month offers to borrow that money at 5% interest over 30 years to buy a fancy house. Do you take the deal? If you do, who’s fault is it that you loaned $400,000 to someone who can’t afford the payments? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 4, 2011, 6:43pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/77 "2011-10-04T18:43:03Z")
> [@Saint\_Cad](#): > > What I am having trouble with in this debate are the Dopers that excuse people for being idiots. And I am having trouble with Dopers that excuse banks for being idiots. > [@](#): > > Let’s make this simple. You bring home $3000 per month and a person offers to lend you money for a home that you have to pay back at $2000 per month. Do you take the deal? If you do, whose fault is it that you now have a loan that you cannot afford. Even simpler: you are a bank, and someone making $3000 a month applies for a mortgage with a $2000 monthly payment. Do you make the loan? Whose fault is it if the borrower defaults on the mortgage? ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [October 4, 2011, 7:17pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/78 "2011-10-04T19:17:04Z")
> [@Lemur866](#): > > But Shodan. > > If I lend $300,000 to my friend Ratso, and he goes down to the track and bets it all on a promising filly, and loses it all, who is the bigger fool–me, or Ratso? But **Lemur**. Betting on a horse and taking out a mortgage is different. > [@](#): > > The difference between a mortgage, and my loan to Ratso, is that the mortgage is secured by the house. That is, if Ratso can’t pay me back, I can foreclose and get the security. That is, the house. Except, what if the security is worth a lot less than the loan? In many states, they can sue you for the difference, and collect (if you have any assets). > [@](#): > > It seems to me that there’s a limit to how far the government should protect people who make loans to idiots. It seems to me that a lender who doesn’t bother to perform due diligence before making a loan doesn’t deserve much protection. The legislators who passed laws allowing lenders to pursue deficiency judgments apparently disagreed with you. Regards, Shodan ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [October 4, 2011, 7:32pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/79 "2011-10-04T19:32:16Z")
> [@Cheesesteak](#): > > You have $400,000 in the bank and a person who takes home $3,000 per month offers to borrow that money at 5% interest over 30 years to buy a fancy house. Do you take the deal? If you do, who’s fault is it that you loaned $400,000 to someone who can’t afford the payments? To be fair, the lenders knew they could sell the bad loans to Freddie Mac who apparently didnt give a whole lot of (read: any) scrutiny to the loans they bought. So there was no risk for the lenders. it was a very good deal for them in the short term and who in business thinks in the long term any more? It was a good risk even if the buyer could not repay, because it was off their books before the loan went KA-BOOM. The repeal of Glass-Steagall under Phil Gramm was what caused the problem. Man should be publicly shamed until he kills himself with remorse. Instead, John McCain would have made Gramm head of Treasury if he was elected. Idiot Republicans! ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [October 4, 2011, 7:46pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/80 "2011-10-04T19:46:03Z")
> [@Frylock](#): > > So you think that someone who is intelligent in most contexts, but stupid in a particular context, deserves the blame for negative fallout from the latter context–though someone who was stupid in all contexts wouldn’t deserve the blame in the same situation? Why does being stupid in one context but not another imply that one should be blamed for negative fallout relative to that context? Huh? No, my point is that foolish decisions often generate undesirable outcomes. And the thing at fault is the fool. Maybe what’s throwing you is my crafting my statement in a way as to not imply that stupid people deserve all bad stuff that comes there way…only those bad things that are attributed to their foolishness. > [@Frylock](#): > > To cut to the chase, it sounds like you’re approaching a claim that the person “should have known better” but I always find that claim to be difficult to understand. How do you know when someone “should have” known better? And why is it that blame attaches to what one “should have” known rather than to what one actually _does_ know? When millions of people do the same things and don’t have negative consequences. Would you say that someone who can’t swim should no better than to attempt to swim from Alcatraz Island to SF? If they can’t swim and they die, who is to blame? If I take all my savings and go enter the World Series of Poker and lose it all, who is to blame? Why in the world are you so intent on removing personal responsibility from one’s actions? That seems nuts to me. We should be trying to attach it more fully, encouraging people to be more prudent. > [@Frylock](#): > > Then what do you take to be the legal significance of your concept of “a fool”? There’s is no legal attachment to the concept of “fool”. It’s simply a practical consideration. If you act foolishly and bad shit happens, when looking for the one to blame, look in the mirror. [Previous page](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467.md?page=3) [Next page](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467.md?page=5)