Re: An answer to foreclosure problems - arson

On Sun, 13 Jan 2008 14:53:30 +0000 (UTC),
EskWIRED@xxxxxxxxxxxxxxxxxxx wrote:

In misc.survivalism, Curly Surmudgeon <Curly.is.not@xxxxxxxx> wrote:
On Sat, 12 Jan 2008 16:55:26 +0000, EskWIRED wrote:

In misc.survivalism, Curly Surmudgeon <Curly.is.not@xxxxxxxx> wrote:

I wasn't aware of Deficiency Judgements despite 25 years in California
real estate as an investor until mentioned here a short time back. Such a
vehicle would massively distort the market from what we experience in CA.

Actually, I'd say that foreclosure extinguishing the debt is a market
distortion.

I guess that is part of due diligence, be aware going in.

Well, yeah. So going in, I'd look for a low initial investment. That
adds to risk, of course, but my risk is capped at my low initial
investment, distorting my decision to buy a marginal property.. I have
little to lose - if I have vacancies, and can't make a profit (even
considering my low invstment), I simply give the keys to the bank and walk
away.

That is the normal thinking of a real estate borrower in a
no-deficiency jurisdiction. It's why the lender needs to
know something about the borrower beyond his name and SS
number, needs to know the market, needs to know the the
collateral, and most importantly, it's why the lender needs
to have some of the borrower's "skin" into the deal.
Lenders who made NINJA (No Income, No Job, or Assets) loans
with nothing down are reaping what they've sown. I can't
imagine how they could have thought things would go any
differently.

That is VERY different from the typical transaction, where a buyer can be
saddled with a losing property that he owes money on, so he avoids
marginal investments.

If the risk was entirely born by the borrower (except for
bankruptcy), that certainly would change the calculations of
all parties. Lending money to almost anyone would be safe
-- or at least much safer. But in reality there is no such
thing as a safe loan, regardless of the laws. And contrary
to what the talking heads on CNBC (and university
classrooms) say, not even loans to the U.S. government are
100% safe. 99.99% perhaps, but not 100%. As every
"survivalist," but not every economist, knows, *** happens.
Sometimes it's really unexpected ***. Google "black swans"
for further explanation.

It seems that when you sign a promissory note, you should
live up to its terms. Giving the collateral to the lender, no matter how
badly the collateral is impaired, seems gorssly unfair to me. It
encourages marginal investments to be abandoned, or at least, to prevent
the owner from putting more capital into them.

And makes the lender more cautious.

Yes, but the lender is not the one who shoud decide,

Let's stop right there. What do you mean, "the lender
should not be the one to decide"? The lender is certainly
the one to decide whether or not to lend, based on all the
risk factors he can judge. Or is that not what you meant?
As to whether or not the borrower gets to decide to repay
the loan: it's his checkbook; of course he gets to decide.
Who else would? With all due respect, and with no insult
meant (really!), you need to get down to basics in your
thinking on this topic.

nor is the lender the
one who shoud take the risk.

Are you really saying there should be no risks involved in
lending other people money?

If lenders tae this risk, they will have to
charge higher interest rates to compensate them.

Interest on loans is based on both the time value of money
AND the risk of loss. More risk necessarily means more
interest. And lenders do take this risk. It's not
avoidable.

(rest snipped)

--
Robert Sturgeon
Alcohol, Tobacco & Firearms should be a convenience store, not a government agency.
http://www.vistech.net/users/rsturge/
.