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Is JackDawson crazy or am I? Do banks forclose or demand more money from loans where the house value drops below the loan amount?

Posted by oblique (aka kkuphal) Feb 20 '09, 13:40

I call shenanigans

Responses:

I don't know the answer, but I know the person who does. - ReluctantCynic Feb 20, 13:50
It depends on what the loan documents say. It is possible that there is a right to do that, but it's highly unlikely in today's environment that they - pmb Feb 20, 13:44 12
- [deleted] 11
  - That's only the case if it's an investment property instead of a personal residence. - pmb Feb 20, 13:52 10
    - [deleted] 9
      - It's the not making payments that is the default, not the drop in value. - pmb Feb 20, 13:55 7
        
        [deleted] 6
        
        But you did say or insinuate that the drop in value causes forclosures, to the point that the bank initiates it - oblique Feb 20, 14:01 5
        
        [deleted] 4
        
        Making payments is purely a cash flow issue. The value of your assets is a balance sheet issue. They're not the same. - pmb Feb 20, 14:12 2
        
        [deleted] 1
        
        Seriously Jack, you're all over the place on this. - pmb Feb 20, 14:19
        
        so? -- nm - oblique Feb 20, 14:09
      - What? If my home dropped in value, I wouldn't stop making payments because of that -- nm - oblique Feb 20, 13:55
[deleted] 30
- Seriously? They can call a loan due even if you've never missed a payment based on an assessed value or something? -- nm - Subversive Feb 20, 13:43 29
  - [deleted] 28
    - If you continue to make $1,000 payments, they don't care. If you try to refinance, and they do an appraisal which shows the value as $1 now, - JaxSean Feb 20, 13:51 6
      - (out of the blue.) -- nm - JaxSean Feb 20, 13:51 5
        
        [deleted] 4
        
        Are we talking about Fixed loans or ARMs? - JaxSean Feb 20, 13:54 2
        
        [deleted] 1
        
        They are completely unrelated. - pmb Feb 20, 14:00
        
        So you're saying there is margin call language written into most residential mortgage contracts? -- nm - Subversive Feb 20, 13:54
    - It depends on what the document says. There is no general right in law to do that. - pmb Feb 20, 13:50 1
      - [deleted]
    - If you keep paying the mortgage every month, I would think they have no right to do anything until the term is up. - Subversive Feb 20, 13:48
    - So long as you continue to pay your loan they don't give a crap. - Ender Feb 20, 13:48 13
      - if you were a back, would it make sense to have a $100,000 loan outstanding when the collateral is only worth $1? -- nm - znufrii, unpatriotic Feb 20, 13:52 11
        
        When they're still making payments it makes a lot more sense than it does to erase the loan and take the dollar. - Ender Feb 20, 14:02
        
        As long as they're making payments, yes. -- nm - JaxSean Feb 20, 13:53 8
        
        Here's a dollar, can I borrow $100k? -- nm - znufrii, unpatriotic Feb 20, 13:54 7
        
        That's different, becuase we'd be signing into a contract with those values. - JaxSean Feb 20, 13:56 6
        
        it's not really different at all. The underlying asset is the same. - znufrii, unpatriotic Feb 20, 14:01 1
        
        You are massively confusing making a loan in the first place and what happens after a loan has been made. - Ender Feb 20, 14:06
        
        [deleted] 3
        
        That only matters if you're selling. Nobody is doing those calculations on their home unless they're selling. -- nm - pmb Feb 20, 14:08
        
        who in the world makes that calculation on their residence? I don't care what my home is worth. I'm not selling it, I'm making payments I can afford - oblique Feb 20, 14:03 1
        
        [deleted]
        
        back-bank -- nm - znufrii, unpatriotic Feb 20, 13:52
      - [deleted]
    - Glad we were talking about an actual situation that likely happened or could happen to nubby -- nm - oblique Feb 20, 13:46 3
      - [deleted] 1
        
        I understand the concept. As znu said, I have never heard of it being applied to the housing market -- nm - oblique Feb 20, 13:49
      - *cancels the bulldozer reservation* -- nm - nubby Feb 20, 13:47
if you're making payments on time I would think that would be a breech of contract -- nm - dogbert183 Feb 20, 13:42
No, they can't. As long as you're making payments on time. -- nm - JaxSean Feb 20, 13:42 1
- Thanks. *makes check mark next to JackDawson is crazy* -- nm - oblique Feb 20, 13:42
Ususally they forclose because the borrower stops paying for something that's worth less than he owes on it. -- nm - TaurusII Feb 20, 13:41
I'd think with as much property that is underwater right now, value-wise, they'd be ridiculous to actually do so. - znufrii, unpatriotic Feb 20, 13:41 3
- [deleted] 2
  - makes sense, it had just never occurred to me to apply it to the housing market. -- nm - znufrii, unpatriotic Feb 20, 13:47
  - "Would you be will to take Citigroup stock as collateral?" -- nm - znufrii, unpatriotic Feb 20, 13:46
I think he's right but only in extreme cases. I can't see the housing market taking another nosedive such that houses are worth half of whattheyarenow -- nm - nubby Feb 20, 13:41

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Is JackDawson crazy or am I? Do banks forclose or demand more money from loans where the house value drops below the loan amount?

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