....Taubman, which estimates the mall is now worth only $52 million, gave it back to its mortgage holder...
Banking-industry officials and others have argued that homeowners have a moral obligation to pay their debts even when it seems to make good business sense to default. Individuals who walk away from their homes also face blemishes to their credit ratings and, in some states, creditors can sue them for the losses they suffer.
But in the business world, there is less of a stigma even though lenders, including individual investors, get stuck holding a depressed property in a down market. Indeed, investors are rewarding public companies for ditching profit-draining investments. Deutsche Bank AG's RREEF, which manages $56 billion in real-estate investments, now favors companies that jettison cash-draining properties with nonrecourse debt, loans that don't allow banks to hold landlords personally responsible if they default. The theory is that those companies fare better by diverting money to shareholders or more lucrative projects.
...Owners of commercial property have an easier time walking away than homeowners because commercial mortgages are typically nonrecourse....
Somebody that gambles with other people’s money expecting to keep the profits and dump the losses on the creditor = seeking undue gains.
You don't seem to understand how debt and equity investment work. A debt investor accepts a fixed interest rate, but does not get to participate in any capital gains, and their risk is much lower. The equity investor - in this case the home buyer, gets all of the potential capital gains, but has an interest expense to the debt investor, and takes much more risk of loss.
This story is a good example. Martin lost 100% of his investment. The lender took a modest loss, the amount of which to be determined after they sell the property.
It's capitalism 101.
If you want to claim Martin was "gambling", then the lender was also "gambling" - just with less risk, and less potential reward.
no one put a gun to his/her head telling him/her to go into severe debt flipping houses back and forth. For a lot of these people dollar signs were clouding their judgement bit too much.
I'm not disputing that, however no one put a gun to the bank's head and told them to lend a huge amount of money in a non-recourse state either. There is risk on both sides as Mark has already pointed out.
The criminal act however is entirely on the side of the bank. The bank loaned people money who could not afford to pay it back, then funded it by telling people the debt was AAA rated.
He exercised his implied put option. Reports say his first loan was for $1,552,000 (80% of purchase price $1.94 million). The Placer County Recorders site appears to show two Deeds of Trust with American Home mortgage: 2007-0066941 (which was foreclosed) and 22007-0066942 (possibly a second?). Here is the house for those who are interested: 2582 ClubHouse Drive W, Rocklin, CA.
What’s your point? That a borrower should make a financial decision contrary to his own best interest because of some misguided loyalty to the corporation that screwed him in the first place?
The bad decision was made when he bought the place. Deciding after the face (when there's no profit) that it's finally time to make a financial decision in his own best interest is what makes him a deadbeat. That's my point.
The bad decision was made when he bought the place. Deciding after the face (when there’s no profit) that it’s finally time to make a financial decision in his own best interest is what makes him a deadbeat. That’s my point.
Deadbeat is just a meaningless label. I think his actions are honorable, and if more Americans did the same thing we'd be in much better shape.
How about American revolutionaries? Was George Washington a sociopath because he stole territory that rightfully belonged to Britain? How about those original Tea Party hooligans? Sociopaths all of them!
Now you're comparing a bunch of greedy bubble-buying dumbasses to George Washington and our founding fathers. You're deranged.