# 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:** 5
**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, 7:55pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/81 "2011-10-04T19:55:15Z")
> [@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? > > 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. This argument seems very odd to me. Basically you’re arguing that people need to be protected from themselves. A couple decades ago I remember the speeches about how banks had to adjust their standards and get loans into the hands of people who until then didn’t qualify. The banks did that. And you know what? For some people who got those loans things turned out fine. They were realistic. Prudent. They were able to cross the threshold of home ownership with a smaller downpayment and their lives improved. Other people either acted foolishly or simply miscalculated their ability to live up to their obligations. So the problem is not inherently with the opportunity for people to buy a home a lowered standards, but by the calculations that each of them went through. > [@Lemur866](#): > > 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? Your horse racing analogy fails because it assumes that with every loan, the likelihood of losing everything far outweighed the expectation that a particular mortgage would be nothing but routine. ---
**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, 8:15pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/82 "2011-10-04T20:15:43Z")
Yes, a mortgage is more secure than a loan to a guy who plays the ponies. The security is the house. Of course, if there’s an unprecedented event, something that nobody could possibly anticipate, such as house prices going down, then you as the lender are in the same sort of trouble. Not for the full amount, but for the difference between the mortgage and the foreclosure price of the house. I mean, Ratso might not blow ALL his bankroll at the track, he might only blow half of it, and you’d be able to get back half, and then he’d still owe you half. ---
**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, 8:19pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/83 "2011-10-04T20:19:24Z")
> [@Shodan](#): > > But **Lemur**. > > Betting on a horse and taking out a mortgage is different. > > In many states, they can sue you for the difference, and collect (if you have any assets). > > The legislators who passed laws allowing lenders to pursue deficiency judgments apparently disagreed with you. > > Regards, > Shodan I agree that a lender can pursue a deficiency judgement, if the laws of their state allow that. I’m just saying, if you think a guy who took out a loan that was obviously impossible for him to service is an idiot, then why don’t you agree the guy who made the loan was an idiot. If Ratso is an idiot for blowing the money at the track, and you have no sympathy for Ratso when he whines that he had no idea he could lose the money, then you shouldn’t have much sympathy for me, either. Of course I can try to pursue a deficiency judgement against Ratso. The trouble is, almost all the time Ratso is going to be judgement proof, because assholes like him don’t have any assets to seize. So who’s the bigger asshole, him or me? ---
**Author:** ![pbbth](https://avatars.discourse-cdn.com/v4/letter/p/f9ae1b/32.png) [@pbbth](https://boards.straightdope.com/u/pbbth)\ **Post date:** [October 4, 2011, 8:37pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/84 "2011-10-04T20:37:23Z")
> [@magellan01](#): > > 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. Why are you trying to remove the responsibility from the lenders? Responsibility is a two way street and if the lenders are doing their best to sell as many loans as possible knowing full well that the borrowers aren’t going to be able to meet the requirements for the loan don’t they then also have some responsibility for the consequences of their actions? People shouldn’t line up to buy snake oil and assume it will cure their ills but at the same time businesses shouldn’t mix up a bottle of rubbing alcohol and sweet’n’low and sell it as snake oil either. ---
**Author:** ![Anaamika](https://avatars.discourse-cdn.com/v4/letter/a/5f9b8f/32.png) [@Anaamika](https://boards.straightdope.com/u/Anaamika)\ **Post date:** [October 4, 2011, 8:41pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/85 "2011-10-04T20:41:36Z")
?? Can’t the banks and the borrowers be at fault here? Because there certainly was predatory lending but quite frankly it is bullshit to say that everyone else was just a poor misled little lamb. I never bought a house because I knew I couldn’t afford it, and somehow managed to never fall into the trap of signing for one, even though pressure came on every side (even here on the Dope). Why can’t we ask both sides to be accountable? The banks were jerks for pushing it. The borrowers were jerks for accepting it and believing in a pipe dream. I’ll give the banks 60/40, but I won’t just exonerate these homeowners. ---
**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, 9:06pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/86 "2011-10-04T21:06:17Z")
> [@magellan01](#): > > 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. I don’t think anyone ever deserves anything on account of “foolishness” if “foolishness” means “being in no position to evaluate accurately the consequences of their actions.” But that’s now what you mean by foolishness, is it? I’m basically trying to figure out what you mean by “fool” and “foolishness.” To me those terms indicate someone who lacks certain mental capacities. To you it seems to mean something else. > [@](#): > > When millions of people do the same things and don’t have negative consequences. Would you say that someone who can’t swim should know better than to attempt to swim from Alcatraz Island to SF? It’s hard for me to imagine a story where a person who “should know better” than to attempt the swim does in fact fail to know better–yet is to be blamed for his act. Any story I can imagine where the person “should have known better” seems at the same time to be exculpatory–he should have known better, but circumstances prevented him from being able to know better. > [@](#): > > If they can’t swim and they die, who is to blame? What, so the guy is like “I have no idea how to swim, and I know it’s dangerous to swim when you don’t know how to swim, and I’ve got no particular need to go swimming at this moment–but I’m going to go swimming now”? I don’t blame him for dying because he is clearly off his rocker. Insane people are excused from blame. > [@](#): > > If I take all my savings and go enter the World Series of Poker and lose it all, who is to blame? Again, assuming the story is as simple as “guy who knows he doesn’t know how to play very well nevertheless, under no pressure to do so, bets his life savings on a game of poker” then I can’t see how to “blame” anyone since we’re clearly dealing with insanity. > [@](#): > > 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. I’m all for personal responsibility. I don’t understand what the concepts of “foolishness” and “blame” have to do with that, though. The skill of taking personal responsibility is the skill of foreseeing accurately and take into serious consideration in a rational way the consequences of your action. Not a word of foolishness or blame is involved in that definition. Would you define it differently? I guess it’s pretty common to think of a more backwards-looking kind of “taking personal responsibility,” meaning something like “recognizing oneself to be the chief cause of certain negative effects, and not resisting when those negative effects fall upon oneself” or something to this effect. Again–nothing about foolishness here, though I can see how you could rephrase this in terms of “blame”. On this understanding, as well, I also think that having a certain (well-tempered) habit of taking personal responsibility is an admirable trait. But of course it’d be going too far for me to take personal responsibility even for those effects I could not have foreseen. But here you’ll want to say that I am responsible for effects I couldn’t have foreseen if I _should_ have foreseen, and we’re back to the question of what it means to say someone “should have known” something, as I discussed above in this post. ---
**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, 10:05pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/87 "2011-10-04T22:05:35Z")
> [@pbbth](#): > > Why are you trying to remove the responsibility from the lenders? Responsibility is a two way street and if the lenders are doing their best to sell as many loans as possible knowing full well that the borrowers aren’t going to be able to meet the requirements for the loan don’t they then also have some responsibility for the consequences of their actions? People shouldn’t line up to buy snake oil and assume it will cure their ills but at the same time businesses shouldn’t mix up a bottle of rubbing alcohol and sweet’n’low and sell it as snake oil either. I agree. That’s why I’ve said more than once that if it can be shown that a lender did something wrong, prosecute him and put him in an orange jumpsuit. ---
**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, 10:26pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/88 "2011-10-04T22:26:47Z")
> [@Frylock](#): > > I don’t think anyone ever deserves anything on account of “foolishness” if “foolishness” means “being in no position to evaluate accurately the consequences of their actions.” But that’s now what you mean by foolishness, is it? > > I’m basically trying to figure out what you mean by “fool” and “foolishness.” To me those terms indicate someone who lacks certain mental capacities. To you it seems to mean something else. I don’t think it necessarily points to a mental deficiency, though chronic “foolishness” might. We all have the opportunity to act recklessly or prudently. Being reckless my result in something really great happening, but the risk of thing going bad is usually increased commensurately. By “foolish” I mean acting recklessly. > [@Frylock](#): > > It’s hard for me to imagine a story where a person who “should know better” than to attempt the swim does in fact fail to know better–yet is to be blamed for his act. Any story I can imagine where the person “should have known better” seems at the same time to be exculpatory–he should have known better, but circumstances prevented him from being able to know better. You should go snowboarding with a bunch of high school or college males. Or mountain biking. Or skateboarding. Hell, just go onto Youtube and you can watch a bunch of people reaping the rewards of their reckless—foolish—decisions. > [@Frylock](#): > > Again, assuming the story is as simple as “guy who knows he doesn’t know how to play very well nevertheless, under no pressure to do so, bets his life savings on a game of poker” then I can’t see how to “blame” anyone since we’re clearly dealing with insanity. Oh, so everyone who loses their rent money is legally insane? Is that just another way to have the Nanny step in and separate bad consequences from the dopey decisions that they usually sprout from? > [@Frylock](#): > > I’m all for personal responsibility. I don’t understand what the concepts of “foolishness” and “blame” have to do with that, though. The skill of taking personal responsibility is the skill of foreseeing accurately and take into serious consideration in a rational way the consequences of your action. Not a word of foolishness or blame is involved in that definition. Would you define it differently? The notion of personal responsibility encourages people to act prudently. If you don’t, you should accept responsibility for the consequences of you imprudence. > [@Frylock](#): > > But of course it’d be going too far for me to take personal responsibility even for those effects I could not have foreseen. But here you’ll want to say that I am responsible for effects I couldn’t have foreseen if I _should_ have foreseen, and we’re back to the question of what it means to say someone “should have known” something, as I discussed above in this post. If you get hit by a falling piano in cartoon world, I think it’s safe to say it’s not your fault. But if you jump over barriers that someone put up because it is deemed somewhat dangerous and you get hit by a shovel, suck it up and be thankful for being alive and freshly educated. Anyone who enters into the biggest financial contract of their lifetime—something that they expect to be with them for thirty years—and things that all that legalese is just mumbo-jumbo there for the hell of it is a dope. And even a dope shouldn’t be surprised when his imprudence results in bad stuff happening. Again, we should be attaching consequences to decisions and behavior more strongly, not less so. I really don’t get why you’d want to weaken that relationship. ---
**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, 10:51pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/89 "2011-10-04T22:51:19Z")
It’s not a matter of “weakening” or “strengthening” the relationship–it’s a matter of accurately judging when the relation is applicable and when it’s not. There are cases which I am saying don’t constitute a person as responsible (and hence that person shouldn’t take personal responsibility) and about which you are saying the opposite. I think that a person who doesn’t know how to read legalese and doesn’t know they don’t know how to read it, and who’s being told by people he’s got many reasons to trust that the contract is a good one to sign, is not necessarily responsible for the result if it turns out his advisors were bad ones and the contract shouldn’t have been signed. I also think it’s very plausible to think that many homebuyers during the bubble were in this position. This is not a way to “weaken personal responsibility.” It’s a claim about what _constitutes_ personal responsibility in the first place. Another issue I haven’t mentioned yet is that the phrases you’re using seem to focus on figuring out who to punish. This may be important (I’m not convinced it is) but to clarify, it’s not at all my own concern. My own concern is how best to solve the problem, such that it is less likely to happen in the future. I doubt even you believe that punishing these “fools” is likely to result in their making better decisions in the future–much less is it likely to result in _other_ people in _future_ situations being less likely to make mistakes. The problem here is a big one, and I’m not sure how productive it is to search for blameworthy agents in particular transactions. Seems a much more efficient use of time to ponder the systemic factors that made the whole mess possible in the first place. ---
**Author:** ![k8see](https://avatars.discourse-cdn.com/v4/letter/k/b5a626/32.png) [@k8see](https://boards.straightdope.com/u/k8see)\ **Post date:** [October 4, 2011, 10:51pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/90 "2011-10-04T22:51:26Z")
In my opinion, there are other, and better ways to secure a loan, than kicking homeowners out of their properties. However, the banks/lending institutions will not change their current tactic, because most are run by a greedy board of directors. Each case needs to be scrutinized carefully, and address individually. The homeowner should be offered a reduced payment plan, or forebearance until they secure other employment. If the new employment does not generate enough capital to meet the mortgage ratio demanded by the lender, then it should be renegotiated. It’s ridiculous, and Un-American to penalize decent people who have hit financial hardship, by taking away the roof over their heads. No wonder borrowers walk away from the property. The lender refuses to change their tact, and the homeowner has no other reasonable choice. The market is upside down, and most mortgagees are under water. Why penalize the homeowner, when the lending institution and it’s lending policies, were unfair to begin with? It’s disgusting…and the ramifications are wide-spread. Because of lending greed, many indebted individuals are filing for bankruptcy, divorce,…then what about the minors? Do we not, at a nation, owe our citizens more than a cardboard box in a cold alley, to raise our precious children in??? ---
**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, 11:47pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/91 "2011-10-04T23:47:44Z")
> [@Frylock](#): > > It’s not a matter of “weakening” or “strengthening” the relationship–it’s a matter of accurately judging when the relation is applicable and when it’s not. Intentionally or not, you wind up strengthening or weakening that relationship. > [@Frylock](#): > > Another issue I haven’t mentioned yet is that the phrases you’re using seem to focus on figuring out who to punish. This may be important (I’m not convinced it is) but to clarify, it’s not at all my own concern. My own concern is how best to solve the problem, such that it is less likely to happen in the future. I doubt even you believe that punishing these “fools” is likely to result in their making better decisions in the future–much less is it likely to result in _other_ people in _future_ situations being less likely to make mistakes. The problem here is a big one, and I’m not sure how productive it is to search for blameworthy agents in particular transactions. Seems a much more efficient use of time to ponder the systemic factors that made the whole mess possible in the first place. I sincerely think the best way to solve the problem is send the message that entering into a financial transaction like buying a home is serious business. That if you are not a lawyer you need to budget for one. That if you act imprudently and sign stuff that you don’t fully understand with so much at risk, bad stuff can happen. And if it does, it’s you’re fault. That only idiots sign such weighty documents without the benefit of a lawyer. The more these people are let off the hook the lees you will reach your stated goal of reducing the incidence of it happening. ---
**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, 11:48pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/92 "2011-10-04T23:48:56Z")
> [@magellan01](#): > > The notion of personal responsibility encourages people to act prudently. If you don’t, you should accept responsibility for the consequences of you imprudence. Agreed. If you lend irresponsibly, don’t come crying to me about the horrible unethical borrowers who can’t pay you back. Take personal responsibility for the fact that you loaned a bunch of money to an idiot, take your lumps, and don’t expect the taxpayers to bail you out. ---
**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, 11:55pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/93 "2011-10-04T23:55:16Z")
> [@Lemur866](#): > > Agreed. If you lend irresponsibly, don’t come crying to me about the horrible unethical borrowers who can’t pay you back. Take personal responsibility for the fact that you loaned a bunch of money to an idiot, take your lumps, and don’t expect the taxpayers to bail you out. I agree wholeheartedly. And that is why the government shouldn’t “encourage” lenders to make loans to people they wouldn’t have when left to their own devices. Once they step in, the water gets muddy. Notice how this was not a problem when you needed 20% down and a friggin job to get a loan. ---
**Author:** ![Frylock](https://avatars.discourse-cdn.com/v4/letter/f/ce7236/32.png) [@Frylock](https://boards.straightdope.com/u/Frylock)\ **Post date:** [October 5, 2011, 12:42am UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/94 "2011-10-05T00:42:42Z")
> [@magellan01](#): > > I agree wholeheartedly. And that is why the government shouldn’t “encourage” lenders to make loans to people they wouldn’t have when left to their own devices. Once they step in, the water gets muddy. Notice how this was not a problem when you needed 20% down and a friggin job to get a loan. Without stipulating to your implicit claim that the government encouraged these kinds of loans, I want to remark that what you’ve said here seems to be in tension with what you said before. A fool acting foolishly because someone encouraged him to is no less a fool for that, is he? And so he deserves full blame for the negative consequences he’s suffering, doesn’t he? So what is it to us whether the government encouraged his behavior or not? Let anyone encourage him any way they like, and let his foolishness (or lack thereof) show itself in his actions–and let him suffer and be rewarded accordingly. Isn’t this what you say about the one taking out the loan? So why don’t you say the same about the one giving the loan? ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [October 5, 2011, 1:29am UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/95 "2011-10-05T01:29:10Z")
> [@Frylock](#): > > Without stipulating to your implicit claim that the government encouraged these kinds of loans, I want to remark that what you’ve said here seems to be in tension with what you said before. A fool acting foolishly because someone encouraged him to is no less a fool for that, is he? And so he deserves full blame for the negative consequences he’s suffering, doesn’t he? So what is it to us whether the government encouraged his behavior or not? Let anyone encourage him any way they like, and let his foolishness (or lack thereof) show itself in his actions–and let him suffer and be rewarded accordingly. Isn’t this what you say about the one taking out the loan? So why don’t you say the same about the one giving the loan? If a man left to his own devices does something stupid, the results are his to enjoy or regret. But when the government tells you you must do something that, previously, when left to your own devices, you did not do, that’s a different kettle of fish. Additionally, I think you might be under the misconception that I want to protect lenders with bad intent, or even lenders generally. I can assure you that I do not want to afford them any special protection. I just don’t want to create an expectation that people are not responsible for their own actions. Particularly when they act imprudently/recklessly/foolishly/stupidly. We should want to minimize that type of decision making, so if its costly to the individuals concerned, that can be viewed as a good thing. And taking out a mortgage that doesn’t suit your situation and then being surprised by it because you were too foolish to think that you should hire a lawyer to go through and explain a complicated legal document to you, is a fairly certain road to an expensive education. My bet that that lesson needs to be taught just the once. Assuming we don’t have the government or someone else step in and muddy the lesson. ---
**Author:** ![Revenant\_Threshold](https://avatars.discourse-cdn.com/v4/letter/r/f1d935/32.png) [@Revenant\_Threshold](https://boards.straightdope.com/u/Revenant_Threshold)\ **Post date:** [October 5, 2011, 1:40am UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/96 "2011-10-05T01:40:39Z")
> [@magellan01](#): > > If a man left to his own devices does something stupid, the results are his to enjoy or regret. But when the government tells you you must do something that, previously, when left to your own devices, you did not do, that’s a different kettle of fish. > > Additionally, I think you might be under the misconception that I want to protect lenders with bad intent, or even lenders generally. I can assure you that I do not want to afford them any special protection. I just don’t want to create an expectation that people are not responsible for their own actions. Particularly when they act imprudently/recklessly/foolishly/stupidly. We should want to minimize that type of decision making, so if its costly to the individuals concerned, that can be viewed as a good thing. On that basis, shouldn’t we also be attempting to minimize the opportunities of risk to such people? I mean, if I have a son or daughter who often acted imprudently with their money, and I wanted them to learn not to, I would certainly attempt to teach them how to spend and save more wisely - but at the same time, i’d also ask relatives or friends not to give gifts of money or to offer them some kind of deal, on the basis that while they’re responsible for their affairs, someone inadvertently (or purposefully, I suppose) providing more chances for them to act riskily isn’t helping either, especially since that might also imply a certain lack of morals even if they make a profit. I can understand not wanting to create a “well, if I make a mistake, i’ll just get my parents/the bank/the government to bail me out!”, but, likewise, surely we don’t want to create a “if I take advantage of a person, it’s entirely their problem” mentality either. And in terms of just plain stopping it happening, as you say, we shouldn’t protect lenders with bad intent. ---
**Author:** ![mac\_bolan00](https://avatars.discourse-cdn.com/v4/letter/m/b3f665/32.png) [@mac\_bolan00](https://boards.straightdope.com/u/mac_bolan00)\ **Post date:** [October 5, 2011, 1:41am UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/97 "2011-10-05T01:41:01Z")
i’m not familiar with real estate lending laws in the US but here’s what i know: 1. a bank’s booked amount outstanding loan consists of principal, interest due and accrued interest. usually, a past due loan can accrue interest only up to a certain point (6 months after you stop paying.) you pay the entire booked amount, you’re settled. less than that and the bank will file a deficiency claim. 2. if the loan is backed with a land collateral, the real estate mortgage agreement should state explicitly that the property offered as collateral will fully settle all of the borrower’s obligations. if not, then there might be deficiency. 3. for purchase of residential units, the same rules on real estate collateral shold hold, and interest should not accrue beyond a certain point. it’s actually hard for a forefeited housing loan to incurr deficiency since the booked amount is being amortized steadily until it has become “seasoned” and the bank that forcloses actually profits from the forefeiture. ---
**Author:** ![CJJ](https://avatars.discourse-cdn.com/v4/letter/c/ecc23a/32.png) [@CJJ](https://boards.straightdope.com/u/CJJ)\ **Post date:** [October 5, 2011, 3:26pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/98 "2011-10-05T15:26:07Z")
> [@Anaamika](#): > > ?? Can’t the banks and the borrowers be at fault here? Because there certainly was predatory lending but quite frankly it is bullshit to say that everyone else was just a poor misled little lamb. I never bought a house because I knew I couldn’t afford it, and somehow managed to never fall into the trap of signing for one, even though pressure came on every side (even here on the Dope). Why can’t we ask both sides to be accountable? The banks were jerks for pushing it. The borrowers were jerks for accepting it and believing in a pipe dream. I’ll give the banks 60/40, but I won’t just exonerate these homeowners. It’s certainly true that both sides bear some fault. However the problem is widespread enough that folks want to establish a general policy/law for dealing with it, and it’s difficult to generally distinguish delinquent borrowers who are simply down on their luck from ones who are being strategic (or conversely, brokers who were prudent from charlatains). It would be wonderful if state courts could deal with the large volume of foreclosures in a timely manner. But the past 3+ years have shown they can’t, and IMO the dragging on of this process has been a significant contributor to current economic woes. In the meantime, any and all general plans that have gained serious traction have favored the lenders, and even in cases where lender fraud is clearly established ([robosigners](http://en.wikipedia.org/wiki/2010_United_States_foreclosure_crisis), anyone?), not only have there been no penalties, but Congress actually [rushed in to protect the lenders](http://www.govtrack.us/congress/bill.xpd?bill=h111-3808) (Obama wisely [vetoed](http://www.whitehouse.gov/blog/2010/10/07/why-president-obama-not-signing-hr-3808) the legislation). Lenders are protected in so many ways during the mortgage transaction. As pointed out up-thread, the borrower is required to pay out of pocket for inspection of the property, pay for a title search, maintain PMI, and come into the transaction at a definite disadvantage in experience. The ability of lenders to secure deliquency judgements is yet another mitigation of risk in their favor (though thankfully some states still classify mortgages on primary residences as non-recourse debt). For a change I’d like to see an active policy that comes down on the side of the borrower, even if it means a few “undeserving” people benefit. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [October 5, 2011, 3:35pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/99 "2011-10-05T15:35:39Z")
The risk of default, or of loss of value of the collateral, is already built into the interest rate being charged, as well as in the minimum down payment to be charged. Why should the lender be protected from accepting the consequences of the risk they took knowingly? By what reasoning does the risk fall entirely on the borrower? IOW, fuck 'em sideways. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [October 5, 2011, 6:52pm UTC](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467/100 "2011-10-05T18:52:47Z")
> [@ElvisL1ves](#): > > The risk of default, or of loss of value of the collateral, is already built into the interest rate being charged, as well as in the minimum down payment to be charged. Why should the lender be protected from accepting the consequences of the risk they took knowingly? By what reasoning does the risk fall entirely on the borrower? The financial risk **according to laws currently in force** is definitely built in. Those laws in a lot of cases include pursuing the defaulter after the foreclosure. [Previous page](https://boards.straightdope.com/t/what-do-you-think-of-lenders-pursuing-deficiency-judgments-against-defaulting-homeowners/598467.md?page=4)