Say No To Tricky Bank Recourse Loans
Is Hamp Recourse or Non Recourse
Update: Hamp has been terminated because few people were able to take advantage of it. The banks are just stalling now, drying up inventory and waiting for the next bubble. They are lending money hand over fist to the wealthy in order for them to pay cash for real estate. These folks are even overpaying in some markets to pump up the comps. Watch out main street.
Update: The jury is out on the new Hamp modifications. They may not change a loan from a non recourse to a recourse loan. That would be good say, for folks in California that want to keep their loans non recourse in case they ever had to walk away. A Hamp loan would remain a recourse loan if you live in a recourse state, because the same terms would apply to the modification in that state.
However, a Harp refinance would change the loan and a non recourse loan could turn into a recourse loan. Always check with an attorney before entering into either of the programs, Hamp or Harp.
Also there is a poll out about American's views about walking away from mortgages. This result is just very disappointing. People have been brainwashed into thinking that you have to pay on loans set up to fail, doomed to fail. What is wrong with these stupid Americans?
Even Cramer, Who I Don't Trust, Told the Truth
Say No to Recourse Loans
Update: Short sellers are being required, in some instances, to sign a promisory note in order to be liable for the difference between the short sale price and the money owed on the loan. Bankers will stop at nothing. I would be mad enough to tell them to stick their promisory note into an unmentionable place. I would walk away!
Update: It appears at first glance that Obama's plan which I don't agree with for economic reasons, at least will not use recourse loans. I am still checking on that. It would appear that Swonk and Feldstein have been rebuked by the Obama team. However, this site is still a warning to be vigilant if you ever get a house loan to make sure that you are not vulnerable to recourse loans, especially for the first note.
I had written about this subject just a few days ago. But now on Valentine's day, Diane Swonk has come out on that paid shill for the banks, CNN, stating that what is needed is recourse loans to accompany the cramdowns.
If you want to be a slave to the banks for the rest of your lives then go ahead and accept recourse loans. But you need to know what that means. If you accept a recourse loan, at lower payments, and your house value continues to drop, the lender has recourse to go after you for the money, if you walk away, for the rest of your life. This is one more noose around the necks of the middle class by the fascists who control the banking system.
Nonrecourse loans give the borrower the freedom to walk away if the loan is unworkable or if you fall into hardship, or if it was a bad investment or if it was a toxic, phony loan. But now, under a recourse loan, the banks have you by the balls, and you will be a slave to the bank whether the loan was appropriate, whether the loan was written on an inflated house, etc. Recourse loans are unamerican. Any president that approves them is owned by the banking system and is NOT your friend.
Just remember, if you don't want the banks to control your lives forever, then you need to say NO to recourse loans. Don't trust those evil people like Diane Swonk on CNN. They are out to eat your lunch.
Definitions of Recourse and Nonrecourse Loans
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Too Big To Fail Banks
The Future of Mortgages
Here is a disturbing scenario. Say the banks take this greedy desire for recourse loans to all loans. That will permanently hamper the loan pool of future buyers. There will be less demand for loans as buyers will all know that the banks want to screw them. Recourse loans may be all that is available in the future for refinancing, or bankrupcy, etc.
The fact that recourse loans are even being considered at all is a reason for people never to buy a house with a traditional mortgage. You simply cannot allow this sort of tinkering to take place by banks, with house prices and house demand already falling. I have a little list compiled of reasons not to buy a house with a mortgage in the United States:
Reasons Not To Buy A House with a Mortgage attached:
1. House values cannot be understood because of government intervention into the housing market. House values are based upon government whim, external economic forces beyond the control of our government, and by changes of the rules.
2. Bank credit availability may be forever hampered because of bank balance issues, credit worthiness issues of the weakened middle classes, and because of the difficulty of valuing houses because of so much government intervention and threats of inflation or more deflation.
3. The very talk of recourse loans makes it difficult to think that there will be more demand for housing than there is now. You banks speak about recourse loans. No one can trust that it will be that easy to sell a house in the future because of the onerous rules that buyers may face.
4. The ability of people to share housing was totally misunderstood by the gurus in finance, including Jim Cramer. These bozos never realized that people don't buy housing if they cannot afford housing even though demographics show a need. The only reason people would buy above their means would be if they could benefit from a bubble in housing. Bubbles in real estate will be very difficult to rekindle again. You cannot squeeze blood out of a turnip when it comes to affordability. You will have tent houses before you have irrational buying that the economists were banking on!
5. Thirty year mortgages may go away. While that is not likely, it could very well happen if the banks are forced to use only credit standards that are real. The mortgages may not actually go away, but they may be out of reach for so many that the market may never be restored.The only reason people could afford the toxic mortgages was that they were given a way to buy a home with easier terms than the first and last month rental requirements that you see in many states!!
These folks cannot afford a mortgage under regular rules unless house prices are less than 3x yearly household income!!!! You should never pay more than 100 times monthly rent for a house if you want a real bargain! And even the historical 15 times yearly rent may prove to be too high for a declining wage and rent scenario!
6. The thirty year mortgage did not exist prior to FDR's New Deal. Prior to that, mortgages were 20 year mortgages with a balloon payment at the end. Banks could call in the mortgages at any time, and did so in the great depression. Look at it this way banks. You banks don't have to call in the loans now. People are willingly giving you the houses as they walk away and you banks are still greedy and grumbling and clamoring for more screws in the vice through recourse loans. You know there are too many houses for you to handle. You have lost your leverage, bankers, and you hate it!
This is another reason never, ever to trust a bank for 30 years. What a ludicrous idea! You have no idea what bank mischief will prevail over 30 years!