Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 11-02-2014, 06:17 PM   #61
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 8,804
Quote:
Originally Posted by bad_LNIP View Post
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.
Did the bank defraud you, personally, in the mortgage you defaulted on? Were you lied to about the terms of the mortgage? You specifically.

I'm not talking about the general case. There were bad actors on both sides. Here in San Diego there was a successful prosecution of a mortgage brokerage that lied to borrowers about the terms of their loan - preying on families that didn't have good English skills. (They had Spanish speaking and Tagalog speaking brokers that misrepresented the terms of the loan to the borrowers.) In that case - clearly the broker is less than honorable. Are you claiming that someone tricked you in the terms of your loan?
__________________

__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 7%, rental income 18%
rodi is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-02-2014, 06:31 PM   #62
Full time employment: Posting here.
Birdie Num Nums's Avatar
 
Join Date: Mar 2010
Location: Seattle-ish
Posts: 776
Not fond of those who ATM'd their home equity, only to walk away when the water rose.
__________________

__________________
Birdie Num Nums is offline   Reply With Quote
Old 11-02-2014, 07:09 PM   #63
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
I am not understanding the vitriol. A contract is a contract--no less and no more. It places requirements on all parties, and contains measures that go into effect if either party defaults. In a strategic default, one party elects to allow these enforcement actions to go into effect. It is not fraudulent, it is not illegal, it is not morally wrong. Both parties signed the contract and agreed to the stipulations (and available enforcement actions) as being in their best interests. The borrower can elect to default at any time, and then the enforcement actions go into effect.

Now, if one of the parties commits fraud, then that is a different matter entirely.

The "banks are bad" line of reasoning is a dead end, and distracts from the issue. It doesn't matter what we think of banks in general, and their behavior, in general, is totally irrelevant to the case at hand. If a particular bank defrauded a particular customer, then that customer should seek a remedy against that bank (to include nullification of the mortgage contract).

No borrower is required to damage the financial position of themselves or their family by continuing to pay on a mortgage if defaulting on the loan leaves them better off (after all the enforcement actions are considered--damage to credit rating, seizure of assets, etc). If the banks wanted better defenses against this, they should have asked for greater guarantees or charged more for the loans. And as for investors who bought the loans downstream--the same things apply. If the banks/bundlers misrepresented the true nature of the underlying mortgages (which apparently happened a lot), then >they< committed fraud. If investors knew about the quality of the loans but were just reaching for an extra 1% yield, or hoping to sell the paper to a greater fool later, then they simply lost their bet. If the US government or a pseudo-government agency is guaranteeing lot of crappy mortgages because they didn't enforce the loan standards (to include the creditworthiness of borrowers, etc), then maybe we should learn a lesson and get them out of this line of business. Instead, real businesses with their own assets at risk can probably be counted on to make better lending decisions with more appropriate enforcement provisions that will reduce the incentive for borrowers to default.

Things are very different for a loan from a friend, etc.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 11-02-2014, 07:19 PM   #64
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by samclem View Post
No borrower is required to damage the financial position of themselves or their family by continuing to pay on a mortgage if defaulting on the loan leaves them better off (after all the enforcement actions are considered--damage to credit rating, seizure of assets, etc). If the banks wanted better defenses against this, they should have asked for greater guarantees or charged more for the loans.

Things are very different for a loan from a friend, etc.
Perhaps I don't have the correct view of this....but isn't a mortgage simply a loan to an individual secured by the house? Just as with a company that issues senior secured debt, the debt issued by the company is secured with first lien rights on that particular asset(s) of the company?

With the company, if the company goes out of business and the assets identified as the collateral for the senior secured debt somehow don't end up repaying all of the senior secured debt, the remaining unpaid debt owed to the senior debt holders isn't magically cast aside - it's secured by the other assets of the company before the unsecured creditors are paid off.

So how is it any different from a mortgage loan, or a car loan, or any loan to a consumer which is primarily secured by a specific asset? If someone gets a title loan on their car, and then gets in a wreck without auto insurance and totals their car, does the title loan company simply get screwed? No, they have recourse to be paid off for the debt. In this unfortunate incident, the value of the collateral (the totaled car) has dropped below what the lender can recover from, but the consumer still owes the title company the value of the debt - so why isn't the consumer still liable for repaying the car title loan as much as they are obligated to repay a house title loan?
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 11-02-2014, 07:33 PM   #65
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by MooreBonds View Post
In this unfortunate incident, the value of the collateral (the totaled car) has dropped below what the lender can recover from, but the consumer still owes the title company the value of the debt - so why isn't the consumer still liable for repaying the car title loan as much as they are obligated to repay a house title loan?
The borrower still owes on the mortgage even if the home drops below the value of the loan. Different mortgages and different states vary as to the "recourse" available to the lender--the assets owned by the borrower that a court can seize and pass to the lender to satisfy the loan.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 11-02-2014, 07:49 PM   #66
Thinks s/he gets paid by the post
Cobra9777's Avatar
 
Join Date: Jul 2012
Location: Texas
Posts: 1,132
Quote:
Originally Posted by samclem View Post
I am not understanding the vitriol. A contract is a contract--no less and no more. It places requirements on all parties, and contains measures that go into effect if either party defaults. In a strategic default, one party elects to allow these enforcement actions to go into effect. It is not fraudulent, it is not illegal, it is not morally wrong. Both parties signed the contract and agreed to the stipulations (and available enforcement actions) as being in their best interests. The borrower can elect to default at any time, and then the enforcement actions go into effect.

Now, if one of the parties commits fraud, then that is a different matter entirely.

The "banks are bad" line of reasoning is a dead end, and distracts from the issue. It doesn't matter what we think of banks in general, and their behavior, in general, is totally irrelevant to the case at hand. If a particular bank defrauded a particular customer, then that customer should seek a remedy against that bank (to include nullification of the mortgage contract).

No borrower is required to damage the financial position of themselves or their family by continuing to pay on a mortgage if defaulting on the loan leaves them better off (after all the enforcement actions are considered--damage to credit rating, seizure of assets, etc). If the banks wanted better defenses against this, they should have asked for greater guarantees or charged more for the loans....

Things are very different for a loan from a friend, etc.
Thank you samclem. Very well stated indeed. I had just been drafting my position on this issue. But after reading your post, I'll just hit the delete button, and add an enthusiastic +1.
__________________
Retired at 52 in July 2013. On to better things...
AA: 55% stock, 15% real estate, 27% bonds, 3% cash
WR: 2.0% SI: 2 pensions, some rental income, SS later
Cobra9777 is offline   Reply With Quote
Old 11-02-2014, 08:10 PM   #67
Thinks s/he gets paid by the post
 
Join Date: Jun 2014
Posts: 1,035
Can we all imagine what the banks would have learned if mass defaults had not happened, if laws weren't changed to protect consumers. God, imagine what that might have done next to boost EPS


Sent from my iPhone using Early Retirement Forum
__________________
dallas27 is offline   Reply With Quote
Old 11-02-2014, 09:00 PM   #68
Recycles dryer sheets
 
Join Date: Nov 2013
Posts: 103
Did the bank defraud you, personally, in the mortgage you defaulted on? Were you lied to about the terms of the mortgage? You specifically.

Not lied to, but they committed fraud/perjury in the course of repossessing the property. That is a crime, it is in writing, and it is illegal. You or I do it, and we go to jail for a felony. They do it, and I think they paid something around 1k as part of the national mortgage settlement. They did it to ME, specifically.

Things are very different for a loan from a friend, etc.

I agree here as well. Overall great post.
__________________
bad_LNIP is offline   Reply With Quote
Old 11-02-2014, 09:08 PM   #69
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,264
Quote:
Originally Posted by Cobra9777 View Post
Quote:
Originally Posted by samclem View Post
I am not understanding the vitriol. A contract is a contract--no less and no more.
Thank you samclem. Very well stated indeed. I had just been drafting my position on this issue. But after reading your post, I'll just hit the delete button, and add an enthusiastic +1.
Agreed - you took the words right out of my mouth off my keyboard.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 11-02-2014, 09:21 PM   #70
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by ERD50 View Post
Agreed - you took the words right out of my mouth off my keyboard.

-ERD50
+1 as well. Do all you moral crusaders read the contracts you enter? Do you expect anything other than the terms that are in the contract to be the terms of the deal?
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 11-02-2014, 09:58 PM   #71
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by brewer12345 View Post
+1 as well. Do all you moral crusaders read the contracts you enter? Do you expect anything other than the terms that are in the contract to be the terms of the deal?
I agree. The contract is the contract. What I find hilarious is when defaulters whine over being denied their next loan due to the default being on their record. Or when their tears flow because a lender is able to negotiate a judgement against them requiring them to pay or have assets seized when the terms of the judgement were part of the loan contract.

Going back to OP's original post, I'm glad to see that terms of the loan contracts are being enforced to the full extent allowable in the applicable jurisdictions. If this means seizing assets, downgrading credit ratings or whatever is possible under the terms of the contract, that's what should happen.

If lenders in non-recourse states are unhappy with the lack of remedies available to them, they should take the situation into careful consideration when making future loan decisions.

Government should stay out of the business of "encouraging" loans to borrowers who would otherwise not qualify. If government wants folks without a down payment and/or without the income to make payments to have a real estate loan, they should just give them an irrevocable cash grant. But government shouldn't pressure or even encourage lenders to make loans to people the lender would not otherwise lend to.

Sometimes I wonder what we've really learned from the whole debacle.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 11-02-2014, 10:10 PM   #72
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by youbet View Post
I agree. The contract is the contract. What I find hilarious is when defaulters whine over being denied their next loan due to the default being on their record. Or when their tears flow because a lender is able to negotiate a judgement against them requiring them to pay or have assets seized when the terms of the judgement were part of the loan contract.

Going back to OP's original post, I'm glad to see that terms of the loan contracts are being enforced to the full extent allowable in the applicable jurisdictions. If this means seizing assets, downgrading credit ratings or whatever is possible under the terms of the contract, that's what should happen.
The contract is the contract. If the lender wishes to exercise all the rights they have when a default occurs, that is their right. Where things get messy is when you find out that the lenders did a whole bunch of shady and illegal things in the process of pursuing defaulting debtors. Most of the time, that is not an issue. In the housing bust, lenders got very, very sloppy and ay have ended up compromising a bunch of the rights they otherwise would have had.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 11-02-2014, 10:25 PM   #73
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by brewer12345 View Post
If the lender wishes to exercise all the rights they have when a default occurs, that is their right.
I take it a step further. I think the lenders should always pursue contractually available remedies whenever a default occurs as long as the likely outcome would yield more than it costs to pursue it. When lenders just "let things go" because they are pressured by government and/or the media, they give a false impression that contractual obligations will likely not be enforced in the future.

When a strategic defaulter screams in disbelief that they can't get a fresh loan because their prior default is on their record or when they receive a court summons and need to hire a lawyer, etc., I wonder what they were thinking when they signed the contract. Did they think that because these kinds of provisions were sometimes not enforced in the past that they wouldn't apply to them now?

As you said in your previous post brewer, and I fully agree, "Do you expect anything other than the terms that are in the contract to be the terms of the deal?"
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 11-02-2014, 11:44 PM   #74
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,382
This is a most interesting thread, for the occasional post that contains facts, such as the list of (mainly) recourse and mainly nonrecourse mortgage states. But even more so for all the posts about who is moral and who isn't and what the sinners did to the sinned against.

I have spent almost all my adult life either in CA or WA, and you can be sure that the first thing I made myself comfortable with was the laws regarding recourse on mortgage loans.

I for one do not see any moral difference between someone who is essentially broke and figured house prices always go up, so what if this house is overpriced and really beyond any zone of good sense for me, and another well financed person who wants to play house price momentum and sees to it that the recovery laws in his jurisdiction are lenient before taking out a loan. I would certainly prefer to be that second guy.

The housing crisis was not cause primarily by sharpies, it was caused by naïfs drunk on their sense of entitlement and the lenders who pandered to them. If the consumer will only cooperate we are about to go around again, with govt pushing for 3% down loans with more liberal underwriting. Only thing preventing it is all of us boomers pushing elderly status, and millennials who don't want much to do with any of this crap.

I read yesterday in Puget Sound Business Journal that so many millenials are choosing to live in in-city locations and renting (I am talking about Seattle). I read about 9 people who had tech jobs working for Amazon, Microsoft, Google, etc going together and renting a large 1920s Capitol Hill House. No matter how big the house, 8 people is a lot of roommates! There are going to be plenty breadcrumbs on those counter tops. Getting the roomies to pay up for the heat and light bills will be fun, as well as getting the fresh air freak to close his damn window. At least there won't be the telephone bills with $850 worth of long distance calls to some left behind lover in Norman, OK.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 11-03-2014, 12:14 AM   #75
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by haha View Post
I have spent almost all my adult life either in CA or WA, and you can be sure that the first thing I made myself comfortable with was the laws regarding recourse on mortgage loans.
+1

I spent some time last year assisting my elderly MIL in defaulting on her reverse mortgage (covered in another thread). BIL and I spent a few bux for legal advise and determined that the remedies available to the lender, even in recourse-state Illinois, were approximately NIL in this case. So, we followed the path to MIL's best interest. Understanding the contract and the laws in Illinois was key to figuring out what she should do. The fact that we were working with a reverse mortgage seemed to make the situation a bit more complicated and we were happy to pay the legal fee for the advise and guidance.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 11-03-2014, 08:08 AM   #76
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 2,211
Quote:
Originally Posted by bad_LNIP View Post
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.
Fanny and Fred being bailed out? GM being saved? Aid during hurricane Katrina? Civil rights groups getting innocent people away from death row? Bill Gates giving away his money to get rid of polio and malaria?

Or more mundane: Millions of parents taking care of their children everyday? Volunteer groups picking up garbage in nature parks?

Totally random examples, but fact is in this real world, we all are interdependent. And "cavalries" do show up.

Quote:
Originally Posted by bad_LNIP View Post
Intent is irrelevant.
Intent is hugely relevant. Contracts are void if one of the signers does not understand what he or she is agreeing to, but just signs anything to get rid of an aggressive seller. General terms & conditions on consumer products are another nice example.

In criminal law in extreme cases it can even be the difference between "oops" and the death penalty.

Intention (criminal law) - Wikipedia, the free encyclopedia

I get your world view. I disagree with it though since you operate on maximizing your own benefit, even if it's at a high cost for others. It is not geared at minimizing harm.

And since most others don't go as extreme as you do, you profit from it. Good for you.
__________________
Totoro is offline   Reply With Quote
Old 11-03-2014, 05:01 PM   #77
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
Quote:
Originally Posted by MooreBonds View Post
Perhaps I don't have the correct view of this....but isn't a mortgage simply a loan to an individual secured by the house? Just as with a company that issues senior secured debt, the debt issued by the company is secured with first lien rights on that particular asset(s) of the company?

With the company, if the company goes out of business and the assets identified as the collateral for the senior secured debt somehow don't end up repaying all of the senior secured debt, the remaining unpaid debt owed to the senior debt holders isn't magically cast aside - it's secured by the other assets of the company before the unsecured creditors are paid off.

So how is it any different from a mortgage loan, or a car loan, or any loan to a consumer which is primarily secured by a specific asset? If someone gets a title loan on their car, and then gets in a wreck without auto insurance and totals their car, does the title loan company simply get screwed? No, they have recourse to be paid off for the debt. In this unfortunate incident, the value of the collateral (the totaled car) has dropped below what the lender can recover from, but the consumer still owes the title company the value of the debt - so why isn't the consumer still liable for repaying the car title loan as much as they are obligated to repay a house title loan?

I agree with the post... just wanted to correct something... after the senior note takes the property any remaining balance owed is equal to the unsecured debt... not superior to it....
__________________
Texas Proud is offline   Reply With Quote
Old 11-03-2014, 05:07 PM   #78
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 2,710
Quote:
Originally Posted by Totoro View Post
Fanny and Fred being bailed out?.
It should be noted that by the way Fannie and Freddie when bailed out the Federal Government had made a profit off the deal (they are making money now and all the profits go to the federal government).
__________________
meierlde is offline   Reply With Quote
Old 11-03-2014, 06:02 PM   #79
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 10,137
Quote:
Originally Posted by Texas Proud View Post
I agree with the post... just wanted to correct something... after the senior note takes the property any remaining balance owed is equal to the unsecured debt... not superior to it....
Depends on the extent of their lien - was it limited to specific property or is it a blanket lien?

Quote:
Originally Posted by samclem View Post
I am not understanding the vitriol. A contract is a contract--no less and no more. ....
Clear, concise and to the point. A great post.
__________________
Living an analog life in the Digital Age.
Gumby is offline   Reply With Quote
Old 11-03-2014, 06:14 PM   #80
Recycles dryer sheets
 
Join Date: Aug 2014
Posts: 417
WOW! So many concepts of how thing should be, what is ethical and what is lawful.

I think it is simple. Everything is simple if you break it down into small bits. I enter a contract to purchase a home. I say I will pay monthly payments of x dollars. That my "word" and as I was raised my word is my bond. If the house losses value and I am underwater, that is my problem, not the loan company. Just as if the home increases in value, that is my gain, not the loan company. If I can't pay, then the loan company has every right to reposes my house as "Partial" reimbursement. I am still obligated to pay the amount that is not recovered from the sale of that home.

Anyone who defaults on an obligation "strategically" (as opposed to really not being able to pay) is someone that I would never do business with. Unfortunately, I am forced to have financial relations due to that person in the form of higher interest rates, taxes and tighter loan requirements.

Personally, I was out of work during all of these home mortgage problems. I had no income and no unemployment benefits. But I could still payed the bills etc because I was "fiscally responsible". While everyone else was getting "forgiven" or their terms of their mortgage rewritten, I was not offered that, nor could I apply for any of it. I understand the problems some people get into, and have no problems when real life situations collapse. But personally, I find the "strategic" default somewhat disgusting.
__________________

__________________
CRLLS is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
I think I'm FI...maybe not, maybe so...um I dunno! panhead FIRE and Money 18 11-19-2012 12:40 PM
Hussman Strategic Total Return lawman FIRE and Money 5 11-04-2008 05:28 PM
Strategic petroleum Reserve, has it been re-filled ? Lakewood90712 Other topics 13 10-22-2006 09:32 PM
Strategic Asset Allocation Olav23 FIRE and Money 15 07-30-2005 11:09 AM
Nords-Q on Strategic Role of Nuclear Subs haha Other topics 21 12-14-2004 04:25 PM

 

 
All times are GMT -6. The time now is 05:24 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.