patrick.net

"Non-recourse" has a lot of if's, but's, and maybe's. AFAIK cash-out refi's will invalidate that. Also, the protection may not apply to investment properties.

BTW, with a foreclosure on you record, your next mortgage will be a lot more expensive even if lending standard is loose. Good luck renting a good apartment. Who will rent to someone with a history of housing abuses.

Woody,

I have to "third" mororcityjim & Peter on the Non-Recourse foreclosure scenario. Regardless of whether the mortgage is of the recourse or non-recourse type, that buyer would almost certainly be on the hook to somebody --most likely the government-- for a sizeable % of the lender's write-off/loss.

If the loan is a non-recourse type (most primary residence non-refi mortgages), the buyer will be taxed for "capital gains" in the amount of the lender's write-off. If it's a "recourse" type (HELOCS, refis, investment property), the buyer is subject to "cancellation of debt income". And to add insult to injury, having your credit ruined will make living anywhere much more difficult, as Peter explained. I don't know if the new Bankruptcy law (due to go into effect in October) will make matters worse for mortgage debtors, but it sure won't make them any better.

Here's the full article I used as a source (SF Chronicle, June 5th):

"Selling house at a loss could have nasty tax implications"
tinyurl.com/cnsja

This is conventional wisdom but as a former owner of 300 apt units I can tell you, you would have no problem getting a decent apt.

Well, you seem to be an expert on this subject, so I'll take your word for it. Even so, having bad credit still costs you more in the long run, not to mention that employers now routinely run credit/background checks.

Also, it is not that difficult to get a mortgage with a foreclosure. I have sold houses to prior forclosees. They pay a bit more and jump through a few more hoops is all. I stand by my position that most people would by much better off by having $100,000 in the bank + foreclosure history versus zero net worth + no foreclosure.

That may be true today (with rampant use of NAAVLPs, $0-down no-doc specials, etc.), but what about after the crash? Will lenders still be willing to lend any amount to almost anyone who can "fog a mirror", as they are today?

In AZ, all SFH loans are nonrecourse whether for investment cash out or whatever. I do not know if the same is true in CA but AZ law is usually based on CA.

See my comments above.

The lenders know they are making risky loans, which is why they won't keep them on their balance sheet. Ultimately it is the buyers of the mortgages Fannie/Freddie and institutional buyers that are facilitating the bubble.

I think the GSEs have had a huge role in this whole credit/housing bubble mess --see the "Too Big to Fail" Thread (from the main page). Of course this works out great for banks/lenders until a GSE defaults. Then it gets very "interesting"...

Woody, your strategy is not bad. I have actually advised my friends regarding the non-recourse "free option". It is not a bad deal, just difficult to do for me personally. I rather keep my credit spotless. :)

I would not be surprised if the pendulum would swing completely in the other direction, as it did with commercial real estate in the early 1990’s.

They always do. Credit is available only when you do not need them.

SAN JOSE, Calif. — Hewlett-Packard Co. (HPQ) is widely expected to cut thousands of jobs next week as part of a long-expected restructuring that will attempt to bring the computer maker's costs in line with business and its rivals' numbers, according to industry analysts.

The exact timing and number of layoffs isn't known, though observers speculate layoffs could range between 5,000 and 25,000 positions.

I wonder how this might affect the real estate market?

Jack, I think you are thinking of Kathy(?) or the other one who recently moved into the Bay Area?