4 ms·

If your house is still worth enough to cover the debt. If the sale of your house is not enough to cover it (which can happen if you bought during a bubble that

If your house is still worth enough to cover the debt. If the sale of your house is not enough to cover it (which can happen if you bought during a bubble that burst), will your whole debt at least be forgiven?

dmoy 3y ago
It's not forgiven, even in a non-recourse mortgage. So it can still e.g. hurt your credit score. They just legally can't pursue you for it. With a recourse mortgage, they can go through normal debt channels (including wage garnishment, etc).
- throwaway2037 3y ago
  "[R]ecourse mortgage": It would be better to say "recourse loan". Mortgages are specific to properties. Loans are generic for anything. In my personal experience, non-recourse loans are basically payday loans with horribly high rates. You would never do it, if given the choice. I guess that 100% of home mortgages (in highly developed countries) are recourse by legal requirements.
  - dmoy 3y ago
    > I guess that 100% of home mortgages (in highly developed countries) are recourse by legal requirements. Not necessarily so in the US. In several states (including the biggest ones like CA and TX), non-recourse mortgages are the default. In other states, sometimes non-recourse mortgages exist too. E.g. right now I'm sitting on a 2.5% fixed 30 year non-recourse mortgage.
- deleted 3y ago
  [deleted]
throwaway2037 3y ago
In short: yes. Imagine you bought a home using a mortgage in the year 2000 in Silicon Valley. Then you go bankrupt in 2007. Your home will probably have appreciated 100-200% during this crazy period. It is very possible you will receive money back from the bank after they sell your home.
- tsimionescu 3y ago
  My question was specifically about the opposite case, so I'm not sure what your point is. Specifically, I'm asking if the mortgage deals the poster above was discussing would help if the house is now worth less than the mortgage.

dmoy 3y ago

It's not forgiven, even in a non-recourse mortgage. So it can still e.g. hurt your credit score. They just legally can't pursue you for it. With a recourse mortgage, they can go through normal debt channels (including wage garnishment, etc).

throwaway2037 3y ago
"[R]ecourse mortgage": It would be better to say "recourse loan". Mortgages are specific to properties. Loans are generic for anything. In my personal experience, non-recourse loans are basically payday loans with horribly high rates. You would never do it, if given the choice. I guess that 100% of home mortgages (in highly developed countries) are recourse by legal requirements.
- dmoy 3y ago
  > I guess that 100% of home mortgages (in highly developed countries) are recourse by legal requirements. Not necessarily so in the US. In several states (including the biggest ones like CA and TX), non-recourse mortgages are the default. In other states, sometimes non-recourse mortgages exist too. E.g. right now I'm sitting on a 2.5% fixed 30 year non-recourse mortgage.
deleted 3y ago
[deleted]

throwaway2037 3y ago

In short: yes. Imagine you bought a home using a mortgage in the year 2000 in Silicon Valley. Then you go bankrupt in 2007. Your home will probably have appreciated 100-200% during this crazy period. It is very possible you will receive money back from the bank after they sell your home.

tsimionescu 3y ago
My question was specifically about the opposite case, so I'm not sure what your point is. Specifically, I'm asking if the mortgage deals the poster above was discussing would help if the house is now worth less than the mortgage.