Americans face post-foreclosure hell as wages garnished, assets seized

[Vic]

That link doesn't tell the full details, but in California if you have a cash-Out refinance after 2012, then the cash-out portion is full recourse. All refinancing in their entirety before 2013 are full recourse loans in California even the purchase money refinancing.

Even prior to HBOR, California was a one action state. Hardly full recourse.

 

[Subyman]

That article sucks



Actual case study from Long Island New York.
Husband is in the construction business and been in the business for close to 20 years. Wife is a stay at home mom, out of the work force for a ver long time.
They bought their first home for around 120K years ago (mid 90's). They sold it for close to 500K and moved to a larger home in a better neighborhood. New house when purchased was around 750K. At the top of the market, comparable houses in the area were selling for a little more.
He had a solid business and they lived comfortably.

Then construction took a hit and business started to suffer. The real estate taxes shot through the roof. The wife started to look for work to help out and she got a job with the school (lunch lady or whatever they are called nowadays) making money comparable to a school bus driver.
They did take out a line of credit to help cover some expenses and after 4-5 years struggling our finally starting to recover.

They took out a 300K mortgage to buy a 750K house that at its peak was worth over 800K but is now probably worth 600K.

Income level expected for 300K mortgage is around 100K. Add on real estate taxes and that income requirement increases considering. I'm guessing he was pulling in 160K-180K consistently until the market got shaky.

Thanks for digging deeper. The hypothetical ignorant roll-the-dice couple that buys well, well above their means and then gets foreclosed on immediately is often tossed around, but when you dig into their specific story there is usually a lot more to take into consideration. I'm not saying there aren't cases of reckless borrowing, but both sides of the table are typically culpable.

 

[pauldun170]

Thanks for digging deeper. The hypothetical ignorant roll-the-dice couple that buys well, well above their means and then gets foreclosed on immediately is often tossed around, but when you dig into their specific story there is usually a lot more to take into consideration. I'm not saying there aren't cases of reckless borrowing, but both sides of the table are typically culpable.

Just to be clear, the case study I listed are folks I know of as told to me.
I didn't mean to imply that these were the same people in the article.

 

[feralkid]

How many those people bought the house as a get rich quick scheme. The house lost value, so they walked away.

So...you've French Kissed Putin, Absolved Hitler and now Wall Street Bankers are your Heroes?



And people say you aren't consistent...

 

[DCal430]

Even prior to HBOR, California was a one action state. Hardly full recourse.

They can still go through the courts and get a judicial foreclose and obtain a default judgement for the entire amount owed for pre 2013 loans as well are seize bank accounts and garnish wages, and they can still get a judicial foreclosure and garnish wages for any cash out amount.

 

[Vic]

They can still go through the courts and get a judicial foreclose and obtain a default judgement for the entire amount owed for pre 2013 loans as well are seize bank accounts and garnish wages, and they can still get a judicial foreclosure and garnish wages for any cash out amount.

And what judge -- in California -- is going to award that?

 

[DCal430]

And what judge -- in California -- is going to award that?

Any judge will, if you owe the money it is no different than any other debt. This is important because FTB and IRS consider these to be full recourse loans for the purpose of forgives of debt tax.

 

[Subyman]

Just to be clear, the case study I listed are folks I know of as told to me.
I didn't mean to imply that these were the same people in the article.

Ah, okay. Thanks for giving an account of a unsensationalized story of the foreclosure process.

 

[Vic]

Any judge will, if you owe the money it is no different than any other debt.

You're funny. And horribly misinformed.
Some hard money lenders might attempt that but, generally speaking, only a cash out junior lien, like a HELOC, can successfully collect on a deficiency in California. And then only if they weren't involved in the senior lienholder's foreclosure action and didn't agree to a short sale (SB458).

 

[DCal430]

You're funny. And horribly misinformed.
Some hard money lenders might attempt that but, generally speaking, only a cash out junior lien, like a HELOC, can successfully collect on a deficiency in California. And then only if they weren't involved in the senior lienholder's foreclosure action and didn't agree to a short sale (SB458).

How am I misinformed, the law is clear and allows for deficiency judgement. You are the one who is misinformed. A judge can't deny someone what the law says they have a right to collect, and the law says they have a full recourse. The fact remains in the eyes of the FTB and IRS it is a full recourse loan subject to forgiveness of debt tax.

THERE IS A REASON THEY CHANGED THE LAW. IF WHAT YOU SAID IS TRUE THERE WOULD BE NO REASON TO CHANGE THE LAW.

 

[Vic]

Any judge will, if you owe the money it is no different than any other debt. This is important because FTB and IRS consider these to be full recourse loans for the purpose of forgives of debt tax.

Uh.. I think you're a bit confused here. A deficiency judgment and the potential tax implications of forgiven debt are 2 entirely different things.
And yes, the IRS will consider any forgiven debt over and above the borrowers original purchase price for the house to be income. Because it was.

 

[DCal430]

Uh.. I think you're a bit confused here. A deficiency judgment and the potential tax implications of forgiven debt are 2 entirely different things.
And yes, the IRS will consider any forgiven debt over and above the borrowers original purchase price for the house to be income. Because it was.

You don't know what you are talking about the IRS and FTB/BOE, only consider debt from full recourse loans to be subject to forgiveness of debt, and they both consider these loans in California to be FULL RECOURSE loans.

Again they state passed a law changing non cash out refinancing from full recourse to non-recourse for a reason, you talk as if the law did nothing and law makers wasted a bunch of time passing laws for no reason.

 

[DCal430]

It also isn't even the HBOR that changed this law in California, it is SB 1069.

 

[Vic]

You don't know what you are talking about the IRS and FTB/BOE, only consider debt from full recourse loans to be subject to forgiveness of debt, and they both consider these loans in California to be FULL RECOURSE loans.

Again they state passed a law changing non cash out refinancing from full recourse to non-recourse for a reason, you talk as if the law did nothing and law makers wasted a bunch of time passing laws for no reason.

Well it did help a lot of them to get re elected..

 

[Vic]

It also isn't even the HBOR that changed this law in California, it is SB 1069.

HBOR lengthened the foreclosure timeframe to the extent that it made judicial foreclosures cost effective for lenders. Hence, SB1069. Prior to, virtually all foreclosures in California were trustee sales.
Seriously, get over it. Except for maybe Arizona, California is arguably the least recourse state in the country.

 

[DCal430]

HBOR lengthened the foreclosure timeframe to the extent that it made judicial foreclosures cost effective for lenders. Hence, SB1069. Prior to, virtually all foreclosures in California were trustee sales.
Seriously, get over it. Except for maybe Arizona, California is arguably the least recourse state in the country.

All that maters is what the law and government say, and they say otherwise.

 

[blankslate]

It is the triumph of a more laissez faire American economy. If you don't like it you must be a commie.


....

 

[OverVolt]

Wow 25% of your wage garnished.... after no raises for a couple years.... and food prices go up. The economy must be doing great. S&P gonna be 2,200 in no time.

 

[Subyman]

It really is hard to see banks getting bailed out and then going after the people. It's practically double dipping on loans. Propped up by government cash while still pursuing what put them there. Obviously there is a ton to take into consideration, but the gut reaction is very negative.

 

[highland145]

It really is hard to see banks getting bailed out and then going after the people. It's practically double dipping on loans. Propped up by government cash while still pursuing what put them there. Obviously there is a ton to take into consideration, but the gut reaction is very negative.

Are you talking about the bailouts that the banks paid back to the govt?

 

[OverVolt]

Are you talking about the bailouts that the banks paid back to the govt?

Oh yea pay back TARP money with QE and ZIRP money all that hard earned interest rate arbitrage.

 

[highland145]

Oh yea pay back TARP money with QE and ZIRP money all that hard earned interest rate arbitrage.

Better than the deal we got with the $$ that went to GM/Fannie/Freddie right? Besides QE and ZIRP are managed by the govt not the banks.

 

[Vic]

It really is hard to see banks getting bailed out and then going after the people. It's practically double dipping on loans. Propped up by government cash while still pursuing what put them there. Obviously there is a ton to take into consideration, but the gut reaction is very negative.

Ya know, when you put it like that, it sounds so simple. But the reality is much more complicated. For every borrower who lost their home because they couldn't afford it, there was another borrower who could easily afford his payments but chose not to.

 

[Texashiker]

Wow 25% of your wage garnished...

No different than child support.

20% first child
25% second child
30% third child
35% fourth child

In both cases the person has a financial obligation to fulfill.

 

[Subyman]

Ya know, when you put it like that, it sounds so simple. But the reality is much more complicated. For every borrower who lost their home because they couldn't afford it, there was another borrower who could easily afford his payments but chose not to.

I completely agree. I even said there is much more to consider. It is not a correct opinion, sorry that wasn't clear. The gut reaction is typically based on the simplest thing. So, I can see why some people that don't have the expertise to dissect the entire banking industry or the issues surrounding its collapse could be very upset.