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Old 11-02-2014, 06:17 AM   #41
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Just my two cents: If it is unreasonable of one party to understand the terms of an agreement, it is good to have protection. That is why consumers and individuals in general have different protections than corporations. It is also why some people have power of attorney over others.

Now, in the context of the whole strategic default thing. If the bank gave you a loan and you didn't have the capacity to understand the terms, by all means default strategically. In fact, the bank should be fined and the person who gave the loan should be jailed. It is abusive.

On the other hand some people knew full well what they were getting into, and played the rules at its full extent just to get an advantage.

That I disapprove of, and not because of ethical reasons. I disapprove because it frequently leads to more rules, destroys trust and hampers trade. Everyone is worse off in the long run.

The hard part is protecting the first group while keeping the second group in check. Intent matters. Which group bad_LNIP belongs to is another question.
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Old 11-02-2014, 06:43 AM   #42
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....If the bank gave you a loan and you didn't have the capacity to understand the terms, by all means default strategically. In fact, the bank should be fined and the person who gave the loan should be jailed. It is abusive.

On the other hand some people knew full well what they were getting into, and played the rules at its full extent just to get an advantage.

That I disapprove of, and not because of ethical reasons. I disapprove because it frequently leads to more rules, destroys trust and hampers trade. Everyone is worse off in the long run.

The hard part is protecting the first group while keeping the second group in check. Intent matters. Which group bad_LNIP belongs to is another question.
So in your mind to justify strategic default all you need to do is feign stupidity?
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Old 11-02-2014, 06:55 AM   #43
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No, in my mind you have to be stupid.

As I said, it is hard to tell those two groups apart.
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Old 11-02-2014, 07:11 AM   #44
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Yes. Banks will stab you in the back and charge you for cleaning the knife. <snip> When the banks give you too much for a loan, it's not free money. Everything has a cost. What about not taking the deal and just borrowing the minimum amount possible, even if it means no McMansion for you? To me, that is where the ethical behavior starts, and it may avoid having to do things in self-defense against the banks later, like strategically default.
I agree- with both your statement on banks and on staying ethical, even when you're dealing with sleaze. My first husband borrowed everything he could. When he started defaulting on his credit cards, he got more unsolicited credit card offers in the mail than I did, and they had higher credit lines.

But debt defaults cost us all. Credit tightens, interest rates (at least on borrowing) go up. and taxpayers absorb a portion of the banks' write-offs.

My BIL, in the 1970s, borrowed about $100K to start a business. It failed and his partner (who had been a co-borrower on the debt) dealt with it by fleeing to London. BIL could have declared BK but chose to pay it off. He subsequently married my SIL (she's the sister of my deadbeat Ex), they started another business and last I heard (mid-1980s) they were worth tens of millions of $$. They own a floor-through in a Prewar building in NYC and a home on a private beach in NJ, currently being rebuilt courtesy of the insurance company.

Sometimes that karma thing really works.
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Old 11-02-2014, 07:57 AM   #45
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"Thirty-eight states, along with the District of Columbia, allow financial institutions recourse to claw back these funds."

Do they mention anywhere the specific states?
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Old 11-02-2014, 08:08 AM   #46
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"Thirty-eight states, along with the District of Columbia, allow financial institutions recourse to claw back these funds."

Do they mention anywhere the specific states?
Just do a web search for "non-recourse states" and you'll see lots of links. Here's one Foreclosure Laws: State by State, Recourse or Non-Recourse
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Old 11-02-2014, 08:40 AM   #47
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There's really nothing 'unethical' about letting the contract play out and stop paying and let them take the house - even if you have the funds to pay that mortgage. If that is 'unethical' then the contract itself was 'unethical', because it allows for that case.
Yes. But at the same time, there is nothing "unethical" or "unfair" about lenders sharing information about your behavior and chosing not to loan you money again. Or, perhaps charging you more or putting special provisions in your loan in the future.

I understand why and how folks strategically defaulted and have no "ethical" problem with it. I am, however, left confused when these same folks who reaped the financial benefit whine when their behavior causes them to be rated a less than optimum future borrower. The facts are the facts. If you do "X" then live with the consequences of "X" and stop whining and crying.
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Old 11-02-2014, 08:54 AM   #48
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Just do a web search for "non-recourse states" and you'll see lots of links. Here's one Foreclosure Laws: State by State, Recourse or Non-Recourse
This is a great link. Thanks MichaelB!

What I learned from reading it is that "recourse" is not a black and white thing. It's more complicated than "recourse" or "non-recourse." Some states categorized as "recourse" states make it difficult for the lender to collect from a defaulted borrower while in other "recourse" states the hurdles to go after the borrower are low. Some "non-recourse" states actually allow some recourse but only with substantial hurdles and lengthly time frames.

Apparently you can't just look for a "recourse" or "non-recourse" label for your state. You have to understand the legal rights of the lender and the borrower, the difficultly of exercising those rights in your particular circumstances, the consequences and the probability of ever having to bear the consequences.
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Old 11-02-2014, 09:38 AM   #49
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Yes. But at the same time, there is nothing "unethical" or "unfair" about lenders sharing information about your behavior and chosing not to loan you money again. Or, perhaps charging you more or putting special provisions in your loan in the future.

I understand why and how folks strategically defaulted and have no "ethical" problem with it. I am, however, left confused when these same folks who reaped the financial benefit whine when their behavior causes them to be rated a less than optimum future borrower. The facts are the facts. If you do "X" then live with the consequences of "X" and stop whining and crying.
Agree completely. If someone decides to take this route, there are consequences. Deal with it!

-ERD50
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Old 11-02-2014, 10:11 AM   #50
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The strategic defaulter just changes the line to if you choose not to bpay them back, then they can take the property. Of course on the commercial side this happens all the time all be it the entity goes into chapter 11 or 7.
Of course if that became the attitude in general the down payment requirement might go to 40% or more.
Basically I was just editing the line " If you are unable to pay them back then they can take the property and it isn't worthwhile to go after you for any more because you can't draw blood from a stone." to change unable to unwilling or choose not to pay
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Old 11-02-2014, 10:22 AM   #51
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Wow. After reading some of the posts here, I am wondering if there are some that would teach their kids that it's ok to steal from a thief.
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Old 11-02-2014, 12:14 PM   #52
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The hard part is protecting the first group while keeping the second group in check. Intent matters. Which group bad_LNIP belongs to is another question.

This is just silly. Nobody is keeping anyone in check. Its a free for all, every man for himself. There is no calvary coming to save the day. I belong in the realist group.
Nope. Intent is irrelevant. You don't get extra FICO points because you defaulted and spent your life savings trying to stay afloat vs someone who strategically defaulted. Court's don't care about your intent to default or not or how hard you struggled or if you worked with the lender or not. It is completely irrelevant and the terms of the contract and remedies have been spelled out in advance. I never saw intent on a mortgage doc.

But debt defaults cost us all. Credit tightens, interest rates (at least on borrowing) go up. and taxpayers absorb a portion of the banks' write-offs.


Contrary to your belief, the world is not run on a communist ideology (not that a communist ideology is inherently bad, per se, I actually studied economics). We aren't all in this together and my decisions don't impact your life, at all. According to this nonsense, consumers would save money by tightening the bankruptcy laws, as the banks claimed, but that isn't what happened, is it? Interest rates and fees went up and consumers got screwed.

I swear by my life and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine. - that's my ideology.

Wow. After reading some of the posts here, I am wondering if there are some that would teach their kids that it's ok to steal from a thief.

So thief's should get away with stealing then?
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Old 11-02-2014, 12:37 PM   #53
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Wow. After reading some of the posts here, I am wondering if there are some that would teach their kids that it's ok to steal from a thief.
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....So thief's should get away with stealing then?
I think his point was targeted to those who justify strategic defaults because lenders are bad guys. It is just one thief (the strategic defaulter) stealing from another thief (the banks/lenders).
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Old 11-02-2014, 01:06 PM   #54
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Yes. Banks will stab you in the back and charge you for cleaning the knife. But knowing that, why would you believe a banker when they say you can loan up to some ridiculous $ amount. Just because a bank will give you a loan for a huge house doesn't mean you have to go for the trap. Some people are naive enough to take the bait, and others figure they will just bail on the deal later. When the banks give you too much for a loan, it's not free money. Everything has a cost. What about not taking the deal and just borrowing the minimum amount possible, even if it means no McMansion for you? To me, that is where the ethical behavior starts, and it may avoid having to do things in self-defense against the banks later, like strategically default.
This was our situation, we met the the bank folks foolishly bringing our "proof of income" with us. We told them our income, etc and offered the papers. They said they didn't need the papers, it was "no documentation".

Then they said we could buy a 1MM house, and would loan us the cash.
Immediately I thought how warm S. America would be with 1MM if I could learn Spanish quickly
However, being responsible, I told them no, we only wanted up to a 250K house, so that if one of us became unemployed, we could still afford the house.
We are still in the house, and have never been to S. America
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Old 11-02-2014, 01:19 PM   #55
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so that if one of us became unemployed, we could still afford the house.
The flip side of that, which DW picked up on, is that also allows one person to ER, like at 56 in DW case.
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Old 11-02-2014, 01:26 PM   #56
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And I would never do business with someone who doesn't keep their word. Fool me once, shame on you... fool me twice, shame on me.

So you have no accounts with any of the major banks? Cool!

Funny how you rationalize what you did my blaming the lenders.

I don't blame the lenders, per se, but I'm just saying I'm not going to be the only honest guy at the table. The lenders aren't as pure as the driven snow or boy scouts either, generally speaking, so I'm just saying I wouldn't feel bad for them. At all.

Do you live in a recourse state?

Yup. No issues with deficiency judgments. Don't believe the hype they tell you to keep consumers in line.
I find your whole premise troubling. Your justification for essentially committing fraud is sad. You are no different than a disgruntled employee that embezzles money from their company because they feel underpaid. Most criminals can "justify" their crime.

You essentially admit you are hiding from your creditors as you likely have assets, otherwise why would you hide? Oh, yeah, they just can't "find" you.

I have dealt with folks like you. Needless to say they are a shady bunch. Unfortunately this PATTERN of behavior is not isolated. My advice to the board is avoid these types. When the $hit hits the fan...they are no where to be found leaving you the bag holder.
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Old 11-02-2014, 01:41 PM   #57
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[QUOTE=timo2;1511731]
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so that if one of us became unemployed, we could still afford the house.
[/QUOTE

The flip side of that, which DW picked up on, is that also allows one person to ER, like at 56 in DW case.
Your DW is smart.
We both retired at 56, and the house is fully paid for, which would not be the case if it had been 1MM.
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Old 11-02-2014, 02:38 PM   #58
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I find your whole premise troubling. Your justification for essentially committing fraud is sad.

Where did I say that? What is the fraudulent act? Defaulting on a debt is not fraud. Down the slippery slope we go. Here's the difference, the banks actually comitted fraud, perjury, on a massive, coordinated scale. False swearing is actually a felony, crime in all 50 states.

You essentially admit you are hiding from your creditors as you likely have assets, otherwise why would you hide? Oh, yeah, they just can't "find" you.

I always take steps to protect #1. Asset protection isn't fraudulent either, its just good prudent action. Banks and businesses take care of themselves and make the self-maximizing business decision all the time. Why shouldn't I treat my personal finances like a business and make cold, simple math based decisions?

I have dealt with folks like you. Needless to say they are a shady bunch. Unfortunately this PATTERN of behavior is not isolated. My advice to the board is avoid these types. When the $hit hits the fan...they are no where to be found leaving you the bag holder.

You don't know me and have probably never met anyone like me. I agree on staying away from shady operators, so the question remains. Do you have any accounts with the major banks? Do you do business with them? They have shown time and again that they will screw their customers at every opportunity. Their pattern of behavior is clear, so do you do business with them?

I think his point was targeted to those who justify strategic defaults because lenders are bad guys. It is just one thief (the strategic defaulter) stealing from another thief (the banks/lenders

I understand the analogy, and while I don't agree necessarily that strategic defaults are justified just because the banks are bad actors (I say the math justifies strategic defaults and nothing else. It's just business.), I am just saying I wouldn't lose any sleep over the act because the banks are bad actors.

Some people quickly leap to the moral high ground on their soapbox and start casting judgment on others, and I say the banks lose the math argument and the hypothetical moral/ethical argument too because the banks are far, far dirtier than any consumer could be.

Doing bad things to bad people is a good thing, so I shed no tears for them any more than I shed tears for ISIS when they get smoked in an air strike.
According to the poster, the original thief (the banks) should not be stolen from, and should therefore get away with their initial theft, which I disagree with. Why should the initial thief get away with their crime? It just encourages more bad behavior and removes the moral hazard.

I don't see why if everyone is playing dirty pool that I shouldn't also. When in Rome and such.
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Old 11-02-2014, 03:50 PM   #59
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While the discussion is centering on banks and homeowners defaults, no mention of who ends up paying the bill.

If you don't think it affects you, perhaps you need to understand who ends up paying...

U.S. to ease repurchase demands on bad mortgages - LA Times

Who do you think owns the defaulted loans?

The "owed" $300,000 for that house that went into default is on the books somewhere, as an asset. The article above should give a hint. Who guarantees that asset?
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Old 11-02-2014, 05:47 PM   #60
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Banks weren't the only businesses ripped off by defaults. During the last recession, many individuals and businesses not only defaulted on their loans to the banks, they defaulted on their payments to other businesses as well. As a result, the businesses supporting the defaulters went out of business or significantly reduced personnel in order to stay afloat. Unemployment jumped in part due to less revenues caused by payment defaults. In addition, banks and other businesses that have less revenues due to defaults are also paying less taxes. So someone has to pick up the tab for the increased unemployment compensation and less corporate tax revenue. That someone is the taxpayer. We all pay for loan defaults by others.
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