Re:The Terrifying Reality of Long-Term Unemployment
by youngtaff on Tuesday April 16, 2013 @07:54AM
(#5557541)
Why do you consider them "archaic debt laws"
Someone takes on a debt using property as security, if they forfeit the security why should they be excused from the difference between the value of the security and the value of the debt?
Re:The Terrifying Reality of Long-Term Unemployment
by LanceH on Tuesday April 16, 2013 @09:22AM
(#5557869)
The aren't excused from the value of the debt. They are returning the collateral, which closes out the debt.
The whole price of the loan (interest rate, points, etc...) was based upon the home being the only recoverable asset in the case of default.
This is why most loans with less than 20% equity have to pay primary mortgage insurance. If your house declines in value, you probably have an agreement that PMI kicks it. The lender being the beneficiary if the PMI has to pay off.
Theoretically this both protects the borrower from predatory practices and encourages the lender to make quality loans.
Re:The Terrifying Reality of Long-Term Unemployment
by dagw on Tuesday April 16, 2013 @08:03AM
(#5557581)
A counter argument is that someone agrees to loan you some money in exchange for some collateral. If the value of the collateral isn't enough to cover the value of the loan in case of forfeit then surely that is the lenders problem since he was the one who set the level of collateral too low.
Re:The Terrifying Reality of Long-Term Unemployment
by yardie on Wednesday April 17, 2013 @03:07AM
(#5563132)
Because you are penalized for not being a fortune teller. They are archaic because it doesn't work well in a modern market. Oh, it worked, alright. Right up until the housing market stopped going up. Then when it went down all that capital was tied up in personal debt. The bank got the house and their pound of flesh, for perpetuity. And I mean that in some people will never be able to pay off that loan and see suicide as a viable option.
No, unemployment and home ownership may be tangentially linked but one does not relate directly to the other.
This is how the unemployment rate matches up for both countries.
https://www.google.fr/publicdata/explore?ds=z8o7pt6rd5uqa6_&...
Notice a difference? Spain, and a lot of European countries, have some archaic debt laws. Where even if you could move to where the jobs are, the mortgage on the house you no longer own is still on your back. So you could take another job but half your income is going to service that old debt. This contrasts pretty well with the way the US and UK handle debt; you invested, the investment failed, liquidate everything, and then move on.