Posted on 07/11/2006 10:24:34 AM PDT by ex-Texan
Law allows lenders to go after personal savings as well as the house, unlike original mortgage.
Homeowners behind in their mortgage payments after hocking the house to pay for a major remodel or a new boat or car may be in for a rude awakening.
If they previously refinanced and their lender decides to foreclose, they may not only lose their house, but the bank also may be able to go after their other financial assets including stocks, savings and their paycheck.
And even if the bank doesn't go after their other assets, a foreclosure may mean a big tax bill from the IRS and state Franchise Tax Board for any shortfall between what the bank gets for the sale of the owner's home and the value of the loan.
"This is going to become a hot topic," predicts Bradford L. Hall, managing director of Hall & Co., CPAs in Irvine, who remembers the pain of foreclosures during the 1990s. "There's very little awareness of what can happen when you can't make your payments and are forced to sell your home for less than the mortgage balance or lose your home through foreclosure." * * *
Norm Bour, owner of Priority Plus Lending in Laguna Niguel, thinks there are some homeowners who should just cut their losses now.
"There are a lot of people who are homeowners who shouldn't be, living day to day just to support the house," he says.
"My advice to them: Sell."
(Excerpt) Read more at ocregister.com ...
Wake up call, people. Time to smell the coffee. Who will be affected? Everybody who refinanced home(s) to pay college tuition for a child, to buy a new SUV, invest in the stock market or to remodel a kitchen. That means millions of people. If you happen to be one of those people who refinanced your home for 120% of value: Consider selling it quickly. Also if you took out an option ARM loan and owe more today than you did two years ago. Better sell now. God forbid that you refinanced your home to purchase a vacation home using another mortgage.
In case you are wondering why all the radio ads are running 24/7 urging you to refinance. The answer is obvious. Lenders are trolling for potential foreclosures. Hard to believe? Not when you realize that lenders can go after all your personal assets. [Want to learn more?] .. Lenders are greedy. Just like credit card companies. Store credit card companies charge 21% interest per year. That must be why they are calling me three times a week to sign up.
If the economy suddently turns sour, be ready for the "perfect economic storm." Some people say the signs are already out there on the horizon: Hurrican season is coming. Recall what Katrina did to oil prices? Conflicts with Iran and North Korea. Plus minor problems in Iraq. And Marxists in Venezuela, Cuba and Mexico. Open borders. Yada, yada.
*Ping*!
What about if you refinanced to get a lower interest rate?
The storm clouds are gathering as we speak. It should be interesting to watch.
Yes, they want you to pay what you owe. The horrors!!
Reference? Never heard of this before.
Same rules may apply. Read the editorial in full.
This applies to foreclosures. The banks can go after you savings, your car, your stocks, just about everything except your retirement.
But in California, refinanced loans, second trust deeds and home equity lines of credit are generally considered recourse loans. In these cases, a lender can file suit and go after almost any of the borrower's assets once they obtain a court judgment.
Oh, oh - that is going to end badly for alot of people. Wonder what the laws are in Mexico...
I have heard of it.
Liberals laid off from big city newspapers who didn't read the fine print.
Lots of people thought that they could simply walk away mistaking the idea of nonrecourse loans...hand the keys to the lender and good-bye.
Refinancing just to get a lower rate and keeping your equity position is usually the right thing to do. That's not what this article is referring to.
Thanks.
You seem to forget this very simple caveat:
Foreclosure is NOT AN ISSUE if you can afford the payments.
And using equity to pay for things that you would normally have to borrow money for is not necessarily a bad idea because the interest is tax deductible.
If you refinanced your house for 120% of it's value, whatever happens is totally your fault!! You need to go back to finance school for a primer. What a STUPID move to finance your equity away. I don't care what the reason is.
Are you nuts? You know what it costs in legal fees to foreclose? I heard from a banker it costs about $25K to foreclose on a home. And if the people can't afford the mortgage, what on earth makes you believe they have any assets to pay for any shortcomings? Why would any bank want to risk foreclosing on a home when the best the banks can hope to do is get their money back. It makes no sense. It is not a moneymaking proposition for the banks.
"What about if you refinanced to get a lower interest rate?"
As long as you aren't upside down on your loan, you're fine. This is about folks who borrowed more than their home is worth. They're in trouble, and they're soon going to be in more trouble, unless they can keep making the payments.
Lenders lose money on foreclosures and those who made too many crappy loans GO OUT OF BUSINESS during the downturn cycles...so take the tinfoil hat off and go learn something about how the mortgage lending business works before spouting off about something you are clueless about....
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