5 ms·

Sure, but it will literally take an act of Congress to cause an exemption. The only time I can think of it happening previously was during the housing meltdown

Sure, but it will literally take an act of Congress to cause an exemption. The only time I can think of it happening previously was during the housing meltdown. Normally a short sale/walking away from a house results in a 1099 for the unpaid mortgage principle. It was waived for a year or two. (There was no attempting for "how" the money was spent. So loading up on toys and not paying the mortgage was a strategy that got rewarded (assuming you enjoy the stress of default.))

rdtsc 11y ago
IRS part of the US Treasury, an executive dept. But yeah, I guess it doesn't mean that POTUS can just make up random new laws under guise of executive orders. It seems Congress and Judicial have powers to override / counter-legislate
abalashov 11y ago
Normally a short sale/walking away from a house results in a 1099 for the unpaid mortgage principle. Heh! If only! It depends on whether your equity is positive. If by chance you owe more on your house than it's worth (i.e. the outstanding principal is not satisfied by the foreclosure sale), there are only about ~11 states in which one can simply walk away. The rest allow a lender to sue you for the difference: http://www.nolo.com/legal-encyclopedia/whats-the-difference-between-recourse-nonrecourse-loan.html http://www.nolo.com/legal-encyclopedia/whats-the-difference-... That's currently happening to me here in Atlanta. I bought a $160K condo at the top of the bubble in May 2007, right before the first wave of subprime-related Fed rate cuts. Because it was a relatively high-interest loan (good for May 2007, when Fed rates were at their peak, but laughable three months later), I still owed $140K on it when I chose to default in 2014-15, and when it was foreclosed in summer 2015, it was sold for $85K. I'm currently being sued by the lender(s) for the $55K.
- jpmattia 11y ago
  Fair enough, and there's an additional level of complication here in CA: The original loan is non-recourse, but a refinance is recourse. So a lot of folks did not fully understand that the offer to refinance an underwater home at a low interest rate was probably worse than just walking away. I think it used to be rare for filing of deficiency suits, so my sympathies on your situation.
  - abalashov 11y ago
    Considering my very negative asset picture, my attorney was very surprised that I was sued, let alone for the full deficiency. He wasn't expecting that. I think a paralegal from the lender's firm just Googled me, concluded I was a "business guy" (so, moneybags), and put me in the "probably can pay us" bucket. Oh, if only they knew how wrong that assumption is. This is one unintended consequence of having to present a successful image to the world for marketing purposes; it makes your creditors think you got Gs.
    - jpmattia 11y ago
      > I think a paralegal from the lender's firm just Googled me, concluded I was a "business guy" (so, moneybags) That's a good guess imo. One side effect of the housing bubble is that banks decimated their loan-recovery units on the way up (because how would a loan ever go bad when prices are rocketing? You just force a sale. So lay off most of the recovery personnel.) As a consequence, when the market went south the recovery efforts were second rate, which probably explains why the bank is wasting its time going after you. But you knew that. :) In any case, good luck to you.
      - abalashov 11y ago
        Yeah, I just don't understand the justice of this scheme. Not to sound like I've got a grudge to bear or a sob story -- it is what it is, and I generally own my mistakes in life -- but, academically: I was barely 21 years old when I got the condo, barely six months at qualifying income history, < 24 months of credit history, hardly any money down. I was definitely a beneficiary of Bubblicious underwriting conditions. With the proviso that nobody foresaw the housing crisis in its eventual form, how is it reasonable to impute 100% of the risk for the real estate market going south on me? Who had the macroeconomic models and computers to evaluate the property risk? The bank. Who ended up with the actual condo in hand, in the end? The bank. Who had the actuarial data to evaluate me as a borrower? The bank. Who got 6.5% APR on one loan and 8.25% APR on the other for 6-7 years? The bank. So, why is it that the bank gets the upside of all of that, and I just get a $55K lawsuit? I would not dispute the notion that I should bear some risk for the value of the collateral, but, all of it? How does that make any sense?

rdtsc 11y ago

IRS part of the US Treasury, an executive dept. But yeah, I guess it doesn't mean that POTUS can just make up random new laws under guise of executive orders. It seems Congress and Judicial have powers to override / counter-legislate

abalashov 11y ago

Normally a short sale/walking away from a house results in a 1099 for the unpaid mortgage principle. Heh! If only! It depends on whether your equity is positive. If by chance you owe more on your house than it's worth (i.e. the outstanding principal is not satisfied by the foreclosure sale), there are only about ~11 states in which one can simply walk away. The rest allow a lender to sue you for the difference: http://www.nolo.com/legal-encyclopedia/whats-the-difference-between-recourse-nonrecourse-loan.html http://www.nolo.com/legal-encyclopedia/whats-the-difference-... That's currently happening to me here in Atlanta. I bought a $160K condo at the top of the bubble in May 2007, right before the first wave of subprime-related Fed rate cuts. Because it was a relatively high-interest loan (good for May 2007, when Fed rates were at their peak, but laughable three months later), I still owed $140K on it when I chose to default in 2014-15, and when it was foreclosed in summer 2015, it was sold for $85K. I'm currently being sued by the lender(s) for the $55K.

jpmattia 11y ago
Fair enough, and there's an additional level of complication here in CA: The original loan is non-recourse, but a refinance is recourse. So a lot of folks did not fully understand that the offer to refinance an underwater home at a low interest rate was probably worse than just walking away. I think it used to be rare for filing of deficiency suits, so my sympathies on your situation.
- abalashov 11y ago
  Considering my very negative asset picture, my attorney was very surprised that I was sued, let alone for the full deficiency. He wasn't expecting that. I think a paralegal from the lender's firm just Googled me, concluded I was a "business guy" (so, moneybags), and put me in the "probably can pay us" bucket. Oh, if only they knew how wrong that assumption is. This is one unintended consequence of having to present a successful image to the world for marketing purposes; it makes your creditors think you got Gs.
  - jpmattia 11y ago
    > I think a paralegal from the lender's firm just Googled me, concluded I was a "business guy" (so, moneybags) That's a good guess imo. One side effect of the housing bubble is that banks decimated their loan-recovery units on the way up (because how would a loan ever go bad when prices are rocketing? You just force a sale. So lay off most of the recovery personnel.) As a consequence, when the market went south the recovery efforts were second rate, which probably explains why the bank is wasting its time going after you. But you knew that. :) In any case, good luck to you.
    - abalashov 11y ago
      Yeah, I just don't understand the justice of this scheme. Not to sound like I've got a grudge to bear or a sob story -- it is what it is, and I generally own my mistakes in life -- but, academically: I was barely 21 years old when I got the condo, barely six months at qualifying income history, < 24 months of credit history, hardly any money down. I was definitely a beneficiary of Bubblicious underwriting conditions. With the proviso that nobody foresaw the housing crisis in its eventual form, how is it reasonable to impute 100% of the risk for the real estate market going south on me? Who had the macroeconomic models and computers to evaluate the property risk? The bank. Who ended up with the actual condo in hand, in the end? The bank. Who had the actuarial data to evaluate me as a borrower? The bank. Who got 6.5% APR on one loan and 8.25% APR on the other for 6-7 years? The bank. So, why is it that the bank gets the upside of all of that, and I just get a $55K lawsuit? I would not dispute the notion that I should bear some risk for the value of the collateral, but, all of it? How does that make any sense?