But you can cut your loss at any time and walk away from the trade. Why canât you cut your loss on a home and walk away too? The laws and contracts specifically show that default is a possibility and that is why lenders charge what they charge and supposedly ask for credit ratings, down payments, etc. If the world you would like, where people never default, existed then the entire process would be different. As far as I know a world where every person and business paid back every loan has never, and will never exist. Donât get me wrong, I agree completely with you in principle, but in todayâs reality it is not possible. My main point is that the lender knew the homeowner could default, and if the homeowner defaults in a legal way then there is no moral issue. No one lied, no one deceived, no one stole, it was simply a financial transaction.
One more thing... You're being kind of naive here. Maybe it's my legal education - but you NEVER go into a contract unless you are prepared for the other party to default. That's why you have penalty clauses... you factor that in. In business I always assume the worst - that I don't get paid, and I am prepared for it. Banks are in business to gauge risk. That's what they do. They failed miserably. That's business.
Not exactly. Home financing terms are as though they were "full recourse". Where the lender understands there is a possibility of default, AND his only recourse is to foreclose on the property, terms are different... as in 30-50% down. Walking on your home isn't any different than getting upside down in your securities account, then "walking"... stiffing the broker for the debit. (Of course, brokers don't let that happen by forcing you to sell before you get into a debit situation.)
If I were upside down I would default in a minute. But i`m not, and did the "smart" thing by putting 20% down on a house in 2005. Not quite the top but close. Sometimes equity can hurt.
I'm thinking of walking right now. it will be a strategic default. i have big savings but its a 'business decision".i own a home i paid $1.9 mil for and its worth $800k as many of my neighbors have been foreclosed on. i have no equity in it as i sucked it all out. park of my reason for walking is my anger at the gov't for enriching banks with taxpayer money. i figure if the banks are making money hand of fist screw them and take a lose on my home. also it could take 20 years for my home to recover to its previous value. i don't need credit so it won't hurt me. i'm just tired as hell of the massive moral hazard that our gov't has encouraged so i figure i'll get my piece of the pie. this is what happens when nobody pays a price for there bad decisions. the haves want what the have nots are getting.
You do understand that they are consequences to these actions, such as foreclosure and deficiency judgments. Something tells me you do not understand business or how to evaluate matters such as these from a business perspective.
Your savings are not immune if you walk away. Chances are you will lose them all along with your home.
my savings are in and llc, my wifes name and ira's. i'm not in a community property state so they can't touch my money in wifes name as the house is in my name. have been moving lost of money to hard cold cash the past 12 months. its not fraudulent conveyance as i've been late on no payments to anyone. got all the bases covered.
The bank would try to go after the LLC. If there are assets on paper that can be linked to you, they would try. But realistically, if you walked away, your house would just become shadow inventory.