3 ms·

Why is it bananas that you can't just walk away from a debt? The foreclosure system in USA is a significant part of what caused the mortgage crisis.

headmelted 8y ago
You should absolutely be able to walk away from a debt. If I'm a bank, and you come to me for a $75k mortgage on a $100k house, the $25k down is my security. That should be the beginning and end of our transaction. If you stop paying the mortgage, the bank gets the house. If the bank reasonably believed there was a chance of the house being worth less than the amount borrowed during the term, they shouldn't have made the deal. It's a simple system that makes perfect sense. Holding people to account beyond the security, as they do in the UK, encourages predatory lending behaviours and is utterly unfair to the borrower.
- sobani 8y ago
  In other countries (for example the Netherlands) YOU take the loan, not your house. To make sure the bank won't be left holding the bag, you use the house you're about to buy as collateral. In the occasion you stop paying, the bank will foreclose the house, but YOU are still liable for the rest of the loan. If you still don't pay, an official collection agency (not your bank, that would be a conflict of interest) will try to cut a deal, come and take your stuff and/or garnish your wages to pay of the loan. You can insure yourself against calamities like divorce and losing your job, for which the bank will give you a discount on the interest rate. Mortgages are limited by what you can afford, so a predatory mortgage loan is practically an oxymoron. Down payments are uncommon, especially for a first time buyer. The only money you need to bring with you is transaction costs (~5% : taxes, notary, financial advisor, etc.) and whatever you think you need for decorating.

3 ms·

Why is it bananas that you can't just walk away from a debt? The foreclosure system in USA is a significant part of what caused the mortgage crisis.

by iamaelephant 8y ago

headmelted 8y ago
You should absolutely be able to walk away from a debt. If I'm a bank, and you come to me for a $75k mortgage on a $100k house, the $25k down is my security. That should be the beginning and end of our transaction. If you stop paying the mortgage, the bank gets the house. If the bank reasonably believed there was a chance of the house being worth less than the amount borrowed during the term, they shouldn't have made the deal. It's a simple system that makes perfect sense. Holding people to account beyond the security, as they do in the UK, encourages predatory lending behaviours and is utterly unfair to the borrower.
- sobani 8y ago
  In other countries (for example the Netherlands) YOU take the loan, not your house. To make sure the bank won't be left holding the bag, you use the house you're about to buy as collateral. In the occasion you stop paying, the bank will foreclose the house, but YOU are still liable for the rest of the loan. If you still don't pay, an official collection agency (not your bank, that would be a conflict of interest) will try to cut a deal, come and take your stuff and/or garnish your wages to pay of the loan. You can insure yourself against calamities like divorce and losing your job, for which the bank will give you a discount on the interest rate. Mortgages are limited by what you can afford, so a predatory mortgage loan is practically an oxymoron. Down payments are uncommon, especially for a first time buyer. The only money you need to bring with you is transaction costs (~5% : taxes, notary, financial advisor, etc.) and whatever you think you need for decorating.