he's not walking away from giving the bank whats fair - the difference of the sell price and his loan = $50,000. but he's not going to give the bank an extra$450,000 simply because he can afford it you borrowed the bank $18,000 to buy a car you already paid off the $10,000 balance you still owe $10,000 balance and interest the car can be sold for $9,500 and you offer the $500 difference bank asks for $5,000 on top of the $9,500 instead
Thanks for sharing. A few thoughts: 1. I am not sure if the bank is demanding the recourse "illegally" since it is not a violation of the law to demand recourse even if Kevin Martin is not obligated to pay it. (Similarly, it is not illegal for Kam to demand certain "favors" from Vanessa Hudgens even if he has no chance of getting them.) 2. About the income tax: If the borrower and the bank were to have agreed upon a "short sale," instead of going the foreclosure route, would KMart's income tax obligation be reduced or eliminated? My guess would be that the type of sale does not make a difference but the sale price does-- a lower sale price = more tax liability for Martin and a bigger tax writeoff for the bank. Is this remotely close to correct? 3. About the "morality" of the situation: The law is what it is. Both Martin and the Bank knew the law going in and, one would presume, priced the transaction (in terms of interest rate, etc.) accordingly. So I don't really blame either side for trying to extract the maximum concession from the other. Maybe the law should be changed, maybe not, but for this transaction, these are the rules both sides played under.
Good grief. It's not Martin's fault that the value of his property fell by $1,000,000!! He didn't trash the place. The bank secured a loan with the house as collateral. The house lost value. The bank took a risk and lost.
OK, "illegally" was a stretch. But it's extortion. It happened to me. I'm going through the exact same thing. The cancelled loan amount counts as income. Yes, it's marginally reduced if it's a principle residence. But not much. And all the equity I lost myself, that loss cannot be claimed. If I bought a house and trashed it, so that it was my own fault that the value decreased, that would be different. However, the housing market is like the stock market. It goes up and down. The bank took a risk with their dollars and lost. K-Mart risked his downpayment of $400,000 and lost as well and cannot take that as a loss on his taxes.
No, the California law was meant to assist buyers because of bad policy from Fannie Mae. Fannie Mae insisted banks write mortgage loans to anyone and everyone even without confirmation of income. That created a huge demand for limited product. The prices skyrocketed. A house worth $300k was suddenly selling for $500k. Banks and mortgage companies got creative and wrote loans where the payments might start at $500 a month and in 6 monts, go up to $2000. The idiots who bought those loans suddenly found out they couldn't pay and had to foreclose or sell short. That dump of short sales and foreclosures on the market caused a huge drop in property values. That's when I was caught. We put our house on the market about a month before the disaster at what was then a fair market price. Then within weeks, we saw homes in our comparison market drop by tens of thousands of dollars. How was that my fault? How did I cheat the bank? I kept paying my mortgage even after I moved and had to pay rent somewhere else. We did a short sale figuring that would actually help out our lenders by doing all the marketing and getting the best offer available. Also, the California law only applies to purchase loans. If anyone refinanced after the purchase, they are out of luck. Those are recourse loans. The banks, in theory, got billions of dollars from the US treasury. I didn't get a dime. Instead, I'm looking at an enormous tax bill and have to take money from a 401k to pay it. So although none of this is my fault, I'm still screwed out of a ton of money.
the article says the loan's $1.5m Bank approval wouldn't be needed if the full loan was being paid out. That's a pretty sweet house for $900K. Have all the 'brick' jokes been used up yet?
Tell me the same thing if it's your money already. It's a business decision. Both KM and the bank lost money. I don't fault KM for seeking to minimize his loss as much as he can and KM will take the consequences (bad credit rating). That's good stewardship of money God has blessed you with.
You are SO repped! He is about the only one that shouldn't be talking. At least give up the moniker, that's the bare minimum.
