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I remember after the 2008 crisis I knew people who defaulted on a $300000 mortgage. The house sold for $130000 at an auction. Back then I wondered if they could

I remember after the 2008 crisis I knew people who defaulted on a $300000 mortgage. The house sold for $130000 at an auction. Back then I wondered if they could have bought the house back.This would have been a pretty sweet deal.

dmurray 8y ago
If this was in the US then almost certainly yes, if they had 130k cash or someone willing to lend it to them despite their recent default. You can generally "mail the keys to the bank" and have no further liability. In other jurisdictions, you might have to declare bankruptcy if you default on your mortgage.
- rhizome 8y ago
  Is jinglemail uncontestable if the bank finds out the borrower has money to pay?
  - Something1234 8y ago
    jinglemail is a very interesting term. Where did you come across that?
    - techsupporter 8y ago
      I've heard it for a long time. It refers to the sound that keys make and that you're "mailing the keys" (sometimes literally) to the bank.
      - deleted 8y ago
        [deleted]
    - rhizome 8y ago
      I forget, some blog during the 2008 US real estate shitshow.
- will_brown 8y ago
  >You can generally "mail the keys to the bank" and have no further liability. No. There is Deed in Lieu of Foreclosure, which sounds like what you are talking about, but that is not a unilateral option you exercise by mailing keys...you need the banks permission, which they usually don’t give, especially when the property is underwater. If people could unilaterally turn in keys and escape the debt you can be sure the banks would have gone under during the Great Recession. As it was the Federal Bailout essentially covered the legal fees for banks to foreclose on these toxic assets and recover what they could. Still even then (like parents hypothetical) if a bank foreclosed and $300k was owed and they sold the property for $130k the next step was a separate filing for deficiency judgement (the difference or $170k in this case).
  - dmurray 8y ago
    I am not a lawyer. I was going to reply to rhizome (sibling post of yours) saying this really differs from jurisdiction to jurisdiction, but in my understanding, in most US jurisdictions the lender has no recourse (either none at all, legally speaking, or tends to get nowhere in practice). Is my understanding really untrue and the banks can go after your other assets in all US states? Edit: A quick google told me that there are 12 "non-recourse states" for "most residential mortgages": Alaska, Arizona, California, Iowa, Minnesota, Montana, Nevada, North Carolina, North Dakota, Oregon, Washington and Wisconsin. https://www.arklawgroup.com/blog/how-do-i-know-whether-my-mortgage-loan-is-a-recourse-or-non-recourse-loan https://www.arklawgroup.com/blog/how-do-i-know-whether-my-mo...
    - will_brown 8y ago
      Foreclosure procedures do depend a little on jurisdiction (ie judicial vs nonjudicial foreclosure states or both), but even within those non-recourse states you link to, lenders can in fact come for deficiency judgements between the balance of the loan and the fair market value of the property. You can find many articles about California, for example, where they will say someththing like “in California, in most foreclosures banks can’t go after borrowers for deficiency judgement”, but it’s misleading. California has both judicial and nonjudicial foreclosure, and judicial foreclosures allow deficiency judgments and nonjudicial foreclosure generally don’t. So why don’t all lenders go for the judicial foreclosure and for the deficiency judgement? Time and Money! It simply takes longer and costs more to go the judicial route and why do that if you ultimately can’t collect from the borrower? The thing is the banks/borrowers have so much data, their automated systems are pretty good at knowing if they will likely be able to collect enough to cover the extra cost of the judicial foreclosure in which case they go that route and then for the deficiency judgement. Once they have that they can garnish wages, attach accounts, etc...
- dragonwriter 8y ago
  > If this was in the US then almost certainly yes, if they had 130k cash or someone willing to lend it to them despite their recent default. You can generally "mail the keys to the bank" and have no further liability. No, only 15 states generally prohibit mortgage deficiency judgements (and those prohibitions mostly apply only to first mortgages, and some are limited even there), in the rest the creditor can come after you for the unrecovered balance after a foreclosure sale. https://www.legalmatch.com/law-library/article/anti-deficiency-laws.html https://www.legalmatch.com/law-library/article/anti-deficien...
paxys 8y ago
If they had $130000 cash the house wouldn't be under in the first place though.
- maxxxxx 8y ago
  In theory I could have done it for them or some other front. It feels scammy but I am just curious.
- lozaning 8y ago
  I thought your house being under is only defined by you owing more than it's worth, not by your ability to pay the mortgage or not.
  - chiph 8y ago
    Technically yes. But if you are underwater far enough, the bank could lose confidence in your willingness to repay the loan and could demand immediate repayment. So if your house is worth $15k less than the outstanding balance and you've got a history of paying on time, they're probably going to let things ride. But if your house is worth $50k less than the balance and they think you might walk away from the debt, they might demand you pay in full, immediately.
    - URSpider94 8y ago
      In most cases, a mortgage lender can’t ask for accelerated repayment no matter how far underwater you are, unless you fall behind on payments or otherwise violate the terms of your loan. If you’re making monthly payments, they can’t ask for a balloon repayment. Additionally, a borrower who is paying on an underwater mortgage is much better than a foreclosure where the bank gets an asset worth less than you owe. Every month that you make a payment improves the bank’s position, since your payment is going to reduce the deficit between loan amount and home value.
    - jldugger 8y ago
      > But if your house is worth $50k less than the balance and they think you might walk away from the debt, they might demand you pay in full, immediately. Sorry, US banks can't issue margin calls on conforming home loans.
ChuckMcM 8y ago
In Las Vegas at that time there was a law on the books that specifically forbade the person on the note, or anyone related to that person, to buy the note in a short sale or at auction. It was written to prevent scams where people could pump up their house value and get refinanced, default, and then buy the house back at a discount and pocket the difference. It was amended in 2016 I believe to allow some purchases if they met specific criteria. The "usual" way to getting around these things has been to create a company and have the company buy it. Companies are nominally 'new' people and don't have family or relatives.
- brian-armstrong 8y ago
  It sounds like companies might get very lonely at Christmas.
- uiri 8y ago
  There are typically laws that deem a company to be related to a person if that person and their (natural) relatives own some threshold percentage of that company.
- kmonsen 8y ago
  I don't see how you call this a scam. The bank should do due diligence before handing out the loan. It's not like the bank is forced to hand out money for bad deals.
  - ChuckMcM 8y ago
    I don't disagree, it is always a question of degree. One party sees a 'scam', the other a failure of the first party to do more diligence. Some see separating poorly informed people from their money as a business, other see it as an injustice that needs to be corrected.
  - Dylan16807 8y ago
    The scam part is taking out a loan with the intent of not repaying it.

dmurray 8y ago

If this was in the US then almost certainly yes, if they had 130k cash or someone willing to lend it to them despite their recent default. You can generally "mail the keys to the bank" and have no further liability. In other jurisdictions, you might have to declare bankruptcy if you default on your mortgage.

rhizome 8y ago
Is jinglemail uncontestable if the bank finds out the borrower has money to pay?
- Something1234 8y ago
  jinglemail is a very interesting term. Where did you come across that?
  - techsupporter 8y ago
    I've heard it for a long time. It refers to the sound that keys make and that you're "mailing the keys" (sometimes literally) to the bank.
    - deleted 8y ago
      [deleted]
  - rhizome 8y ago
    I forget, some blog during the 2008 US real estate shitshow.
will_brown 8y ago
>You can generally "mail the keys to the bank" and have no further liability. No. There is Deed in Lieu of Foreclosure, which sounds like what you are talking about, but that is not a unilateral option you exercise by mailing keys...you need the banks permission, which they usually don’t give, especially when the property is underwater. If people could unilaterally turn in keys and escape the debt you can be sure the banks would have gone under during the Great Recession. As it was the Federal Bailout essentially covered the legal fees for banks to foreclose on these toxic assets and recover what they could. Still even then (like parents hypothetical) if a bank foreclosed and $300k was owed and they sold the property for $130k the next step was a separate filing for deficiency judgement (the difference or $170k in this case).
- dmurray 8y ago
  I am not a lawyer. I was going to reply to rhizome (sibling post of yours) saying this really differs from jurisdiction to jurisdiction, but in my understanding, in most US jurisdictions the lender has no recourse (either none at all, legally speaking, or tends to get nowhere in practice). Is my understanding really untrue and the banks can go after your other assets in all US states? Edit: A quick google told me that there are 12 "non-recourse states" for "most residential mortgages": Alaska, Arizona, California, Iowa, Minnesota, Montana, Nevada, North Carolina, North Dakota, Oregon, Washington and Wisconsin. https://www.arklawgroup.com/blog/how-do-i-know-whether-my-mortgage-loan-is-a-recourse-or-non-recourse-loan https://www.arklawgroup.com/blog/how-do-i-know-whether-my-mo...
  - will_brown 8y ago
    Foreclosure procedures do depend a little on jurisdiction (ie judicial vs nonjudicial foreclosure states or both), but even within those non-recourse states you link to, lenders can in fact come for deficiency judgements between the balance of the loan and the fair market value of the property. You can find many articles about California, for example, where they will say someththing like “in California, in most foreclosures banks can’t go after borrowers for deficiency judgement”, but it’s misleading. California has both judicial and nonjudicial foreclosure, and judicial foreclosures allow deficiency judgments and nonjudicial foreclosure generally don’t. So why don’t all lenders go for the judicial foreclosure and for the deficiency judgement? Time and Money! It simply takes longer and costs more to go the judicial route and why do that if you ultimately can’t collect from the borrower? The thing is the banks/borrowers have so much data, their automated systems are pretty good at knowing if they will likely be able to collect enough to cover the extra cost of the judicial foreclosure in which case they go that route and then for the deficiency judgement. Once they have that they can garnish wages, attach accounts, etc...
dragonwriter 8y ago
> If this was in the US then almost certainly yes, if they had 130k cash or someone willing to lend it to them despite their recent default. You can generally "mail the keys to the bank" and have no further liability. No, only 15 states generally prohibit mortgage deficiency judgements (and those prohibitions mostly apply only to first mortgages, and some are limited even there), in the rest the creditor can come after you for the unrecovered balance after a foreclosure sale. https://www.legalmatch.com/law-library/article/anti-deficiency-laws.html https://www.legalmatch.com/law-library/article/anti-deficien...

paxys 8y ago

If they had $130000 cash the house wouldn't be under in the first place though.

maxxxxx 8y ago
In theory I could have done it for them or some other front. It feels scammy but I am just curious.
lozaning 8y ago
I thought your house being under is only defined by you owing more than it's worth, not by your ability to pay the mortgage or not.
- chiph 8y ago
  Technically yes. But if you are underwater far enough, the bank could lose confidence in your willingness to repay the loan and could demand immediate repayment. So if your house is worth $15k less than the outstanding balance and you've got a history of paying on time, they're probably going to let things ride. But if your house is worth $50k less than the balance and they think you might walk away from the debt, they might demand you pay in full, immediately.
  - URSpider94 8y ago
    In most cases, a mortgage lender can’t ask for accelerated repayment no matter how far underwater you are, unless you fall behind on payments or otherwise violate the terms of your loan. If you’re making monthly payments, they can’t ask for a balloon repayment. Additionally, a borrower who is paying on an underwater mortgage is much better than a foreclosure where the bank gets an asset worth less than you owe. Every month that you make a payment improves the bank’s position, since your payment is going to reduce the deficit between loan amount and home value.
  - jldugger 8y ago
    > But if your house is worth $50k less than the balance and they think you might walk away from the debt, they might demand you pay in full, immediately. Sorry, US banks can't issue margin calls on conforming home loans.

ChuckMcM 8y ago

In Las Vegas at that time there was a law on the books that specifically forbade the person on the note, or anyone related to that person, to buy the note in a short sale or at auction. It was written to prevent scams where people could pump up their house value and get refinanced, default, and then buy the house back at a discount and pocket the difference. It was amended in 2016 I believe to allow some purchases if they met specific criteria. The "usual" way to getting around these things has been to create a company and have the company buy it. Companies are nominally 'new' people and don't have family or relatives.

brian-armstrong 8y ago
It sounds like companies might get very lonely at Christmas.
uiri 8y ago
There are typically laws that deem a company to be related to a person if that person and their (natural) relatives own some threshold percentage of that company.
kmonsen 8y ago
I don't see how you call this a scam. The bank should do due diligence before handing out the loan. It's not like the bank is forced to hand out money for bad deals.
- ChuckMcM 8y ago
  I don't disagree, it is always a question of degree. One party sees a 'scam', the other a failure of the first party to do more diligence. Some see separating poorly informed people from their money as a business, other see it as an injustice that needs to be corrected.
- Dylan16807 8y ago
  The scam part is taking out a loan with the intent of not repaying it.