America's house price time bomb (BBC)

[eppur_se_muova]

By Michael Robinson
BBC World Service

With the American housing market in its worst crisis since the Great Depression of the 1930s, President Bush is expected to sign into law a massive new government intervention designed to slow the slide.

The intervention would come as a little known quirk of US law threatens to drive down house prices even faster.

Faced with seemingly never-ending falls in the value of their properties, some American home-owners are taking radical action; they are choosing to walk away from homes and their mortgages.
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Though banks can repossess and sell the homes of borrowers who stop paying their mortgages, under a legal quirk originating in the Great Depression of the 1930s, banks cannot easily pursue borrowers for any balance outstanding on the main mortgage on their homes.
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"The losses for the financial system from people walking away could be of the order of one trillion dollars when the entire capital of the US banking system is only $1.3 trillion."
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more: http://news.bbc.co.uk/2/hi/business/7529277.stm

:wow::wow::wow:

[Jacobin]

1. hmm

{i}Though banks can repossess and sell the homes of borrowers who stop paying their mortgages, under a legal quirk originating in the Great Depression of the 1930s, banks cannot easily pursue borrowers for any balance outstanding on the main mortgage on their homes.

This statement is not correct in most states.

[KoKo]

2. Apparently some folks who got mortgages in the past few years

had their mortgages sold off many times The purchaser signed the mortgage agreement with a bank that no longer owns it. Couple of state judges have ruled the banks can't go after the homeowner because its impossible to find one single bank that owns the original mortgage pecause the loans were chopped up into pieces and sold to many different entities. So, technically the homeowner can just leave the keys on the counter and walk away.

These Mortgage dealers got themselves in some very sticky business and they didn't check the rules for how "signing a contract between borrower and lender" really works. They ignored the law.

[BR_Parkway]

5. Or just stay in the house - since no one else can prove ownership or

a valid lien.

[Skittles]

3. on a related note

repukes are no longer touting "home-ownership" numbers in their campaigns

[Enthusiast]

4. Someone should dig out a piece

Of video where W says "Home ownership is at an all time high!" Member that?

[JPZenger]

6. Community Banks in danger because of construction loans

Most community banks were not stupid enough to get involved in questionable sub-prime mortgages. However, they are involved in construction loans to local developers. Therefore, as the housing market gets weaker, they have some vulnerabilities.