That said, if there is a moral obligation for the borrower to pay the negotiated price regardless of circumstance, then the entire transaction is inequitable. While I am certainly not condoning abandoning responsibility, the entire enterprise is apparently rigged for the lender.
So I agree to pay $100k for a house. The bank loans me money to pay for it, but states unequivocally that it will take the house if I don't honor my repayment terms. OK. So the remedy for the lender is to take possession of the property it financed in good faith if repayment terms are not honored.
However, in most states, the law not only provides for the lender to take possession of the property, but to seize additional assets in an attempt to recover any shortfall from auction/resale.
This, to me, seems like having your cake and eating it too. The other ancillary impacts (credit rating destructions, etc.) I find perfectly fine. But it just appears odd that the lender is not also assuming some value risk in the transaction. They are guaranteed options to be made whole, whereas the borrower is not.
Ding Ding Ding!
(If I knew how to html bold I would)
“However, in most states, the law not only provides for the lender to take possession of the property, but to seize additional assets in an attempt to recover any shortfall from auction/resale.”
50 States
50 sets of mortgage laws
In Delaware you sign both a Mortgage and a Note... meaning you have pledged the property and everything else you have and make.
Beware of real estate guru’s selling “get rich quike” or “walk away” schemes.
Unless the book has 50 chapters for 50 states... it’s worthless
Well stated.
Late last year a case went through the AZ court. The law now is that a creditor can issue a 1099-C, then STILL, seek any deficiency from foreclosure sale.
The only way to get rid of the debt now is to settle, and the creditor has little motivation to, or for the borrower to file a Chapter 7.
Amazing.