This is criminal
All of these types of maneuvers will just add to the pile of bad debt the American taxpayer ultimately winds up on the hook for in the end. There’s another who has put their residence into an L.L.C. and intends to leave. I don’t know the ins and outs of that one.
I personally think these folks should honor the commitment they made to the original bank since they are able to do so, as evidenced by the purchase of the new house on a 30 year fixed prior to embarking on the default. They have hired lawyers for a reason-to pass the loss on to someone else. There were three of these in the fall and I expect more as spring arrives.
These people (the doctors) aren’t doing anything illegal, immoral or unethical. Then entered a contract with a bank. The bank has absolutely no room to claim ignorance as to what deal it was getting into.
Persuant to U.S. law, this was a non-recourse loan. Meaning that the borrower had the pre-negotiated option to default at any time and give up the property to the creditor and forefeit their equity, if any, to absolve themselves of further obligation. That’s the deal the bank agreed to when they made the loan. The doctors astutely asserted their default option, and would have been fools not to.
Yes, they took advantage of the bank. The bank deserved it. That’s business, and nothing illegal or immoral happened.
I own a home free and clear, with no debt whatsoever. I regret not being more astute myself when the bubble was forming. I knew it was a bubble, and knew what was ultimately going to happen. What I should have done would be to borrow as much money as I possibly could against it (cash out) in 2006, then after the bubble burst, default on the loan, hand the keys over to the bank, then buy the home back at a discount at the foreclosure auction. Yes, that’s legal, and it’s also entirely moral and ethical. It would represent an intentional, premeditated strategy to exploit the stupidity of a bank willing to make a non-recourse loan at 100% LTV in a bubble market. The banks were being exactly that stupid, and I regret not having been astute enough to have done what I describe above. I respectfully submit that anyone who finds objection to such an action on moral or ethical grounds is either unfamilliar with business and contract law, or is trying to impose their own personal values on a system that already has defined standards of conduct.
People in business exploit other people for being stupid and take their money away from them every day. It’s called capitalism. Some don’t agree with the ideology of capitalism, but if you’re living in the United States, like it or not you’re living in a capitalist society. That’s just the way it is.
If there were some capitalist awaiting me every time I did something stupid I would hope they might have some compassion on my stupidity and not take advantage of me just because they could.
Just because we CAN do something doesn’t mean we SHOULD.
We COULD march on Washington DC today with rifles and start shooting the morons that run our country, but we DON’T.
I prefer my stupidity over your coldness, but that’s just me. … Don
Right on dps. I like your view. Those who take advantage just because they can are no better than Bernie Maddof and many others like him who have helped to set up the conditions by which wall street has come to it’s downfall and who have ripped off many innocent and unsuspecting people of their hard earned life savings. I’m with you. I prefer my stupidity over their coldness.