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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Dale Baker who wrote (140626)	7/12/2010 3:41:18 PM
From: Katelew	Respond to of 541674

You are so right....it does vary from state to state. I found a PDF file and now have lost the link but made some notes. Most states are recourse, meaning the bank can go after the property, the wages, and the other assets of someone who stops making their mortgage payment. Typically, the lender will seize the property, sell it at auction, and then file a deficiency judgment on the former homeowner for the difference between the mortgage and the amount received at auction. No one in these states, rich or not, can just blithely walk away. There are 11 states that are considered non-recourse, but six of them do have a system of rendering a deficiency judgment after the property has been sold at auction. The lender has a choice whether to pursue this because doing so carries some other difficulties to the lender and usually ties up the property for 12 months. So in these states deficiency judgments are less frequent. There are only five states, though, that are truly non-recourse. In these states a person can actually walk away. Even though he has the assets and income to keep making the mortgage payment, he can just walk away from the property. The lender is stuck with the property and by law cannot go after the borrower with a deficiency judgment. These states are AZ, CA, MON, ND, and OR. This lax regulation may have contributed to the outsized number of defaulted mortgages in especially CA and AZ. People could buy one or even multiple homes without much fear of what a default would bring. As for an LLC, in actuality, these don't offer much in the way of shirking responsibilities. Very few lenders will lend to an LLC. Those who do typically require down payments of 35% to give themselves a cushion. And one can't game the system by transfering a property into an LLC. The reason is that the original mortage had a personal signature on it which would make the owner of the property still personally responsible. My conclusion was that the writer of that article was a nitwit who felt like engaging in some class warfare. The rich are indeed different and indeed ruthless, but in most states they are bound by the same property contract laws as everybody eles.