That is not the law in many (probably most) states. In those states that appear to be non-recourse on house loans, one had better have all of their ducks in a row, because there are many exceptions.

In the case of the people that bought and planned to keep and live in their home and now can’t pay for it, they are now the losers in this.

For the ones who bought for profit and now can’t flip it, the lenders are now the losers, because the flippers had little to lose.

In either case Cramer’s remarks are not illegal, as the lender took the property as collateral and the law allows no recourse against the trustor except the loss of their collateral.

To erase credit card debt the person would have to file for bankruptcy protection, and with the new laws, that is now a lot harder to rid one’s self of.

In both cases the lenders and the people who bought this debt are more to blame for allowing this to happen in the first place, so now they are reaping their rewards. If people who everyone knew would not be able to pay for what they lent them were not given the opportunity to borrow in such a manner we wouldn’t be discussing this today.

I mentioned both Contract Law and Criminal Law (fraud). But you asked anout the latter, so
I will tell you how it is fraudulent.

He is not recommending that only people with the inability to re-pay their loan walk away, he is recommending that people who simply paid too much for houses to walk away from their loans. If you make $4K/month and your mortgage re-set payment is higher than your income, obviously paying the loan under the original terms is not possible.

But having bought unwisely in 2005 or 2006 does not give you a pass to walk away from these obligations. What lender on this planet would allow a deed in lieu of foreclosure (or short sale, etc.) for someone fully capable of re-paying the loan? NONE would.

What other path besides fraud would allow a person to accomplish Cramer’s suggestion? Again, he is not speaking to those who have no choice about defaulting, he is talking about making the affirmative decision to walk away from the loan because house prices are declining.

“Remember, your house is only a good bet if you can build equity.”
“There are no up markets, and there are markets that are falling 20-30%, and those are the ones where it’s much smarter to walk away from your house.”

Inspired by Mr. Cramer’s quote: “… and all that really happens is is that you made a bet and you lost, so don’t compound it by continuing to pay.”

I’m organizing a bus trip to Vegas next weekend.

Here’s the plan:

1. we head to Las Vegas, and pick a casino of choice

2. based on the fact that in the past we’ve paid our bills and honored our commitments, the casino agrees to extend us all credit markers in various denominations…
perhaps even based somewhat on our “creative applications”

3. we gamble (bet) the funds on the games of our choice, but always within the casino’s scope of allowable games
(that way it’s not really our fault if we lose.)

4. If (and probably when) we lose, and the marker is used up (so it appears we have no other convenient, pain free options available to us), we turn again to our sage wisdom, and remind ourselves and each other that:

“all that really happens is is that you made a bet and you lost, so don’t compound it by continuing to pay.”

We tell the casino manager that we’re real, real sorry, and as the bus pulls up and the doors swing open, we all… you guessed it… just walk away.

Yeah!!! That should work out great!!!

Who would like to RSVP and get a seat on the bus?

I would say that Cramer’s approach may not be fraudulent, but it is lacking in honor.

I know a lady who found herself seriously upside down recently. First she looked at refinancing options- there was nothing she could do. She researched a short sale- there was no way her lender was going to work with her in the time frame available. She would have done a deed in lieu of foreclosure, but that wasn’t going to work either. When she had exhausted all other possibilities, she walked away.

Sometimes walking away is unavoidable- but I think that people of honor make every attempt to honor their contracts before breaking them. They aren’t cavalier and say, Oh wait a minute, keeping my word is hard, and not to my financial advantage, I’m not bothering. [I once sold a home and came to closing with a check for I think about $5K- I chalked it up to an expensive education.]

That said, when you’ve done the best you can, and walking away is the only option, it’s not the end of the world. The bank was supposed to allow for defaults in their calculations. Rental houses work as well as purchased. Pack up, move out and move on.

What’s fraudulent about what Cramer is suggesting?

Although Agnostic won’t like it I’m going to place it here as a checklist to see if it rings a bell with anyone:

Perilous Times and Perilous Men

1 But know this, that in the last days perilous times will come:

2 For men will be lovers of themselves, lovers of money, boasters, proud, blasphemers, disobedient to parents, unthankful, unholy,

3 unloving, unforgiving, slanderers, without self-control, brutal, despisers of good,

4 traitors, headstrong, haughty, lovers of pleasure rather than lovers of God,
5 having a form of godliness but denying its power. And from such people turn away!

Cramer summed it up in just one line: “Just walk away.”

Makes me wonder… How does he regard the other commitments and promises he’s made?
(wife, employees, peers, investors, others?)

Again, I don’t know this Cramer from the one on Seinfeld… but wholesale societal acceptance of this sort of stuff is a great sign for me!!!

I had remembered L telling me that a Deed in Lieu of Foreclosure isn’t always easy to do. I asked him again and he said:

If the lender does a deed in lieu of foreclosure, it eliminates the chance that it could be bought at the trustee sale and they could recoup their money that way. They get the title to the property immediately and now have to sell it on the open market like every other house for sale. It’s better to gamble and go thru the trustee sale and hope someone buys it there.

What Cramer has been saying is just what he’s been saying— walk away. What else are you going to do? You can’t keep making enormous payments, you can’t sell it, you can’t rent for more than your payment, you can’t refinance it– no more wonky loans. It’s not worth what’s owed on it, so what other choice do you have?

It’s not going to increase in value for 10 years or more, so what he’s saying is walk away. Listen to what he says really close. He says something like “You wouldn’t keep a losing or worthless stock would you?”

]]> http://housingdoom.com/2007/07/31/cramers-not-kidding-just-default/#comment-6506 mbrown77 Wed, 01 Aug 2007 02:26:13 +0000 http://housingdoom.com/2007/07/31/cramers-not-kidding-just-default/#comment-6506 Guys... I think you're taking what Cramer is saying a bit too literally. He's not advocating fraudulent or criminal behavior. The concept he is referring to is "Deed in Lieu of Foreclosure". When he says "walk away" I don't think he's actually suggesting that people pack up a suitcase, strap on their nikes and literally walk down the street away from their house. It's a hyperbole. The Deed in Lieu of Foreclosure process is most often advantageous for both the mortgagor and the mortgagee. Anyone who is in this unfortunate situation would probably invest the fifteen minutes necessary to figure this out. Guys…

I think you’re taking what Cramer is saying a bit too literally.

He’s not advocating fraudulent or criminal behavior. The concept he is referring to is “Deed in Lieu of Foreclosure”. When he says “walk away” I don’t think he’s actually suggesting that people pack up a suitcase, strap on their nikes and literally walk down the street away from their house. It’s a hyperbole.

The Deed in Lieu of Foreclosure process is most often advantageous for both the mortgagor and the mortgagee. Anyone who is in this unfortunate situation would probably invest the fifteen minutes necessary to figure this out.

Reuters stretched Bill the Butcher’s words to (and maybe past) the breaking point. That was an exercise in wishful thinking more than anything else.

A. Jim Cramer turning as bearish as hell:

“buying homes in 2006 was like buying the Nasdaq in February of 2000″

Ignorance is bliss, but hindsight is a blessing. I’m shocked. If he keeps talking like this he won’t be on the air much longer I guess… for reasons of “National Security”.

B. The Fed admitting that they know nothing:

“I’m not saying that the Fed should ignore what happened last week – we need to understand what is happening”

tip @ Fed Governor Poole: the credit cycle is contracting together with the real estate bubble, while the world is losing trust in the USD. That’s what happening

http://biz.yahoo.com/rb/070731/usa_fed_poole.html?.v=3

Fed will act on market slide if warranted: Poole
‘Poole, a voting member of the Fed’s interest-setting committee this year, was speaking at a University of Missouri luncheon in Columbia, Missouri. The event was closed to the media, but a copy of his remarks was made public.

“Most of these upsets stabilize on their own, but some do not. I’m not saying that the Fed should ignore what happened last week – we need to understand what is happening,” he said.’

I had to look at Urban Dictionary for a translation. It says that have a bird is Bostonian for what we say here in Arizona have a cow. : )

Old Mike is going to have a bird …