Nonrecourse debt in the States

[ismaele00]

Hey guys,

We're having here in Spain now a huge debate about the convenience or not to compell by law the nonrecourse debt as the common way of formalize a mortgage (only for the first home, meaning the residence, not "holidays" home or beach apartment... you know).

That means than when you are not able to pay your mortgage (like now is happening here) you give your dwelling to the bank and you don't need to comply the law principle of universal liability of the debtor (you respond with all your goods to your debts).

I know how the thing works in the State of New York where I've been living, but have no idea of the rest of the States, so if someone could give me a hand I'd thank it.

 

[billfred]

Home mortgage is non-recourse unless you personally guarantee it (not common).

 

[WoodyO]

What language are you speaking?

 

[Headholio]

If you are upside down and then default on your mortgage, the bank can come after you for the balance due after the house is liquidated, right?

 

[ismaele00]

What language are you speaking?

U Mexican?

 

[ismaele00]

If you are upside down and then default on your mortgage, the bank can come after you for the balance due after the house is liquidated, right?

Here, you have to ask for this sort of mortgage (clause, legal article... I don't know how you call it) and the bank can or not accept it.

If they don't accept it and you stop paying the mortgage for three months (you can't be expulsed before this time), a judge will get public auction of the home. The main problem is that the bank that gave you the credit is responsible for the housing rate (appraisal, assessment, rating), so, as a private company for profit they will value it for a lower price.

This new price will be subtracted of the total amount of the debt, but if noone else's presented to the acution, the bank can get the home for less than the 50% of the rating (remember that the rating has been done for the same bank).
And the remaining debt has to be satisfied with ALL your goods, so people lost their home and still having a debt. It's an absolutly social exclusion.

eg,

I have a debt with the BANK A for US 240,000.
I lost my job, so I can not pay. I've paid US 20,000 (we are not considering interests).

The home is rated (by the bank) in auction in US 100,000. But nobody goes to it, so the bank gets the home for US 49,000.
Then, 49,000 + 20,000 (I've paid already) = 69,000 --> 240,000 - 69,000 = 171,000.

I lost my home and I have a debt of US 171,000.

In the rest of Europe, things work more or less the same way, but they have what they call "second chance policies", I don't know exactly how it works.

 

[billfred]

If you are upside down and then default on your mortgage, the bank can come after you for the balance due after the house is liquidated, right?

I don't think so unless your personally guarantee the loan. It is like he said, is it with recourse or without. Without recourse, they can only go after the secured property.

 

[ismaele00]

I don't think so unless your personally guarantee the loan. It is like he said, is it with recourse or without. Without recourse, they can only go after the secured property.

I'm not sure if I've understood what you said but if you have a "common" mortgage (without the nonrecourse option here) they (the bank) can go against EVERYTHING you have (well, not all, but almost).

If you have it, when you give the home the debt's paid off.

 

[PICK3]

so if someone could give me a hand I'd thank it.

earthrider

 

[Headholio]

I'm not sure if I've understood what you said but if you have a "common" mortgage (without the nonrecourse option here) they (the bank) can go against EVERYTHING you have (well, not all, but almost).

If you have it, when you give the home the debt's paid off.

A short sale is when the bank forgives you of the unpaid balance after a sale that is less than the mortgage amount. Unless you have that agreement, I think you are still on the hook for the balance.

http://en.wikipedia.org/wiki/Short_sale_(real_estate)