Re: Mark assets to Market
Another problem, in my mind, is the states that don't allow mortgage recourse. It will probably come as a shock to our non-US readers, but certain states in the US (such as California and Florida, epicenters of the housing bubble) don't allow banks to come after a mortgagee's assets if they default. They can take the house, of course, but if that falls $100K short of paying off the mortgage debt they can't come after the $200K you might have sitting in your checking account. You'd take a hit to your credit score for a few years, but that's it.
NINJA loans encouraged people who had no assets to take on more debt than they could handle, but non-recourse mortgages encourage people with assets to take on debt beyond their means. Particularly for investment properties, such as second/third homes in warm non-recourse states like CA, FL, and AZ.
Texas is also a non-recourse state, but didn't see a housing bubble. I guess because it is less desirable to "snowbirds" looking for second homes. Other than Texas, the list of non-recourse states matches up well with the states most affected by the housing bubble with the exception of Nevada. That's a recourse state, but saw a big bubble too. Lots of people there with no assets, probably more to blame on NINJA and negative amortization loans.
Biting the hand that feeds IT
