USA - You can walk away from a mortgage

[casper007]

Something I didn't realise whilst looking into the sub-prime situation in the States ... over there 'aparently' you can simply walk away from a mortgage if you can't afford to pay ... and do it without declaring bankrupcy... (LAAussie - maybe you can confirm this?)

Part of the problem has been situations like this ...

Owner can't afford repayments ... has 90 days to live in home without making a payment before being evicted.

Go to another lender ... get another mortgage they can't afford ... live there 90 days and repeat over and over.

Not saying everyone was doing this but apparently many were.

No wonder they are in a pickle over there.

 

[depreciator]

It's probably not true, but I heard people just have to put their keys in the letterbox and tell their lender they have vacated and all bets are off.
Scott

 

[casper007]

It's probably not true, but I heard people just have to put their keys in the letterbox and tell their lender they have vacated and all bets are off.
Scott

Well if it is true ... the talk that Australia will follow USA with massive numbers of forclosures could be a myth??

 

[Sunfish]

They are non-recourse loans.

What some smarties are doing is buying another "depreciated" house before they wreck their FICO score, move into the new one and hand back the keys to the old one. They can repair the damage to their credit rating later. LOL

 

[alexlee]

One complaint by a lot of people is that FICO scores can be gamed. There are legal ways of increasing your FICO score that doesn't actually involve any change in your financial circumstances.

Obviously that's not the whole story but it does make it more likely that US mortgagees will just walk away. In Australia, people will do more to try to remain in the home.
Alex

 

[skater]

Many things to do with Mortgages are different in the US. Over there, (so I have been led to believe), you can get assumable Mortgages, so if someone else takes on your Mortgage payment, they get the house. I don't think you have to even apply for the Mortgage in this case.

 

[oasis1frog]

They are non-recourse loans.

Why can't we have non-recourse home/investment loans in oz ?!!!!

 

[VYBerlinaV8]

I wonder how the banks would go if you offered to 'take over' a mortgage for them? Could be a good way of sniffing out bargains...?