patrick.net

What happens if one were to refi, pay off the mortgage in 30 years, and in another 10 years, decides to sell? Will they still have to repay the forgiven amount?

Vain says

What happens if one were to refi, pay off the mortgage in 30 years, and in another 10 years, decides to sell? Will they still have to repay the forgiven amount?

I bet it is multi generational. Even your grand kids can't escape the repayment of forgiven amount.

Nomograph says

bubblesitter says

I bet it is multi generational.

I hear it’s retroactively multigenerational. My dead great uncle just had his future mortgaged away.

But he was probably retroactively baptized by the Mormon church, and also owes retro tithing. Poor guy is screwed long after he died.

PPete says

Again, borrowers are not reading the fine print. It’s the funniest thing to watch.
The “forgiven” amount remains as a lien on the property. This is sneakily written into every one of these principal reduction contracts. it goes like this: the borrower pays a lower monthly on a “reduced” principal amount. But say homes go up in value in 10 years and the “owner” goes to sell at what they think is going to be a profit based on the current principal owed. At the point of sale, the bank holding the loan comes in and takes back the “forgiven” amount from the loan mod period. The banks slyly write these clauses into the contracts and there is nothing the home “ower” will be able to say or do about it down the road. The only recourse is to default now.

Well, what did you expect to see when the govt steps in ? The banks, thankfully are still making sure your, mine and everyone elses deposites held in our accounts will be paid back from these deadbeat losers.

PPete says

The “forgiven” amount remains as a lien on the property

You sure about that? That's a principal deferment. They're talking about principal reductions. I hope you are right, but I have my doubts.

I looked at the article, and I don't get it. What's the incentive for banks?

I was expecting to see some sort of giveaway for every loan they write down. Instead, it's "take this current borrower, who's been reliably sending you a check every month. I'll buy their debt from you for 70 cents on the dollar."

Collecting money as long as the borrower can pay and then doing a short sale sounds like a much better deal for the bank - you get to collect money now, and still get the house's current market value at the end of the day. The only way this would make any sense is if you think the collateral backing the loan will continue to fall and you'd rather get 70c/dollar today than 50c/dollar later. If banks thought that way, they'd be trying to dump their current foreclosure inventory as fast as possible rather than dragging their feet and hoping for a rebound.