patrick.net
An Antidote to Corporate Media
1,193,887 comments by 13,881 users - Artsiegirl, BeneTiberCato, richwicks online now
invite responseComments 1 - 3 of 3 Search these comments
A bank can't just waltz in and demand a deficiency judgment and get it on the spot, at least in California.
The bank has to actually sue a person, meaning serve them with the papers. The person being sued has 20 days to file a response. The response doesn't even have to admit anything... they just have to respond. There is a formal procedure to this that takes time.
When deciding to sue someone, you have to carefully analyze:
1. How much do they owe?
2. How much will it cost to sue and try to get that money?
3. If a judgment is granted, does the person even have the ability to pay?
4. What is the likelihood of the person declaring bankruptcy, nullifying all the expense of suing, and wiping out the judgment?
If the banks just blindly sued everybody, they'd need another bailout. It has to be cost effective or I'd want to believe they wouldn't bother.
The banks will reach a point where they can cookie cutter the whole process and make money from it. It will be just like the RIAA, line everyone up and fire off the papers. Some won't be able to pay, some will. Some will declare bankruptcy.
I'm guessing this will go on for 1-3 years, before the government stops it or puts in some stops. The backlash will be pretty severe, but a few years down the road this whole mess will be swept away and these people will look more like deadbeats to most people, then the average owner right now.
If the banks don't do it, other companies will come along and offer up to buy these, or do perform the whole process and kick back some money. Essentially free money to the bank.
I'm guessing one of the methods people will learn to use to block these actions is to rack up their credit cards with those banks, and essentially say: If you ask for that 50K back, we're going to declare bankruptcy and you'll lose that 50K plus the other 20K we've racked up....
dont_getit
2010 Feb 8, 5:56am
Yes, refinancing is a recourse loan. If the seller is any smart, h/she would consult a lawyer and make sure this provision is included in the final contract, that the bank is done with the loan once and for all. Period. Its better to pay the attorney fees now rather than declare bankruptcy later.
Recently, short sale has become a preferred method over foreclosure for those with underwater mortgage. Although a banks are encouraging short sale, there is one important fact many short sales owners may have overlooked, especially in California. As we know, many people refinance their mortgage during boom time between 2004-2007. As a result, their loan become recourse loans. Only the last few batch of greedy buyers buy at the peak and never got a chance to refinance. It seems unfortunate at the first look but this could have been their life saver in the future.
Banks let underwater mortgage owners short sale their property. For the refinanced mortgages, banks retain the right to go after the borrowers. Banks will not do it right now, but in several years when the employment issue is over, banks can easily go to court and obtain an order to with hold short salers' income and other assets. This can spell a blow to mortgage owners financial in the future because, legally, banks have all the right to recoup their losses from all refinanced loan.
I believe banks never do anything against their principle, that is making money, although it appears banks are willing to shoulder the losses in short sale at present time. They will find any mean to claw their money back . Banks are here to make money. This is true in the whole world.
#housing