Originally Posted By SuperDry <<< ///Not only that, but I recall reading that people are chosing to pay the CC's first, mortgage second./// ---such interesting times we live in.... So folk are now paying the unsecured debt before the secured. >>> One reason to do so is if you live in a "no recourse" state, such as California, where a mortgage is secured only by the value of the home, and the debt cannot be collected otherwise. That is, if you default on your mortgage in a no-recourse state, the only thing the bank can do is foreclose on the house and sell it in order to satisfy the debt. If you owe more than the house gets during the foreclosure sale, then the bank just has to eat it. This is different than credit card debt where they can pursue various collection methods, including suing you, getting a judgment, and then garnishing your wages, seizing other assets, and so on.
Originally Posted By barboy But SuperDry here in California a lender holding a secured interest in a piece of real property can seek a deficiency judgment against the the borrower if the borrower refinanced and 'cashed out'. BK lawyers have been busy helping their clients add home lenders the list of other creditors in hopes of discharging the debt.
Originally Posted By barboy I've been thinking about this over the last year: from 1998 to mid 2005 homes in California(I presume other areas too) have skyrocketed in value and those who amassed truckloads of debt have had to be far more strategic in deciding if BK would help them or not. California statutory homestead exemptions in BK for the **typical** married couple is $75K(under 65 and/or without disability). So now that home values are in freefall far more indiduals are more inclined to file for protection. And since a homestead exemption in Califonia of 75K is actually closer to 150K or more in asset protection in many cases due to the higher price of real estate(compared to other areas) and the prevalence of prepayment penalties linked to loans a BK trustee is far less inclined to force the sale of one's primary residence to satisfy creditors claims.
Originally Posted By fkurucz <<So folk are now paying the unsecured debt before the secured.>> FWIW CCs aren't really unsecured. If you default your creditors can come after you and garnish your wages. In most states mortgages are "non recourse" loans. So if you default and they foreclose and sell the house for less than what you owe them, you are off the hook. Note: it is my understanding that if you refi that is no longer the case, and they can come after you for the balance (ditto with HELOCs). So what is happening is that homedebtors who are underwater and can't afford the payments are walking, hanging on to their precious CCs.
Originally Posted By barboy ///FWIW CCs aren't really unsecured. If you default your creditors can come after you/// I agree, it's just terminology.
Originally Posted By Sport Goofy << Is it fair to withhold credit to an extremely credit worthy individual with a perfect "record" who just happens to want to live in the old family home which now unfortunately exists in a downtrodden neighborhood? >> Downtrodden doesn't really describe some of the foreclosure epicenters in this country right now. There are large swaths of brand new construction neighborhoods that are in foreclosure in the suburbs. Overzealous builders and speculators bid these homes into the stratosphere, even though there really was no market there for people who would actually live in the home. In contrast, the homes in the old, established neighborhoods are doing much better in this downturn.
Originally Posted By Mr X Well, yeah. I know that. I was just using it as an example (I was trying to think of a person who's situation or wishes would put them in such a position, despite being a minimal credit risk).
Originally Posted By barboy ///Downtrodden doesn't really describe some of the foreclosure epicenters in this country right now./// Yes, in some places things have fallen at least 1/2 off from the high point. California's central valley real estate economy, which is cluttered with truckloads of less than 6 year old homes, has not just been hit extremely hard but has completely collapsed! Some of these homes which once sold for around the $600K mark back in the spring of '05 are now down to the very high $200K's(285-300K)and they're still falling as I write. I can attest to our neighborhood's financial health, about a 70 minute drive west from the epicenter of California's real estate market crash(Stockton)whereby homes that were once sold for 1.3 million are now desperately and futilely trying to sell for 1 million flat. Good luck! as they will need to drop at least 50K more before getting serious to sell. Getting back to the point: credit card companies know this well and I'm sure they are sizing up where people are living--- just as SinglePark has indicated-- as well as card activity and field of employment.
