Let's assume the banks are going to be able to pick and choose the properties that are most profitable to foreclose on (properties w/ high equity, for example). Some people who have mortgages also have high deposits that are going to be just about impossible to completely withdraw and put into bullion. Would it be worthwhile for a person in this position to just have the money in a bank account at the same bank that has the mortgage? If the banks try to say that they will foreclose if the person doesn't make the mortgage payment that person could say "You have x number of dollars of mine on deposit for that very purpose. Take the money out of there" That way whether or not the money disappears off the computers come 1/1/2000, the person would have hard copies that shows the bank has their money and that that money should be used to pay the mortgage, thus nullifying the bank's right to foreclose. Can someone give me feedback on this strategy. Much appreciated.

-- John Townsend (JTooon@aol.com), June 26, 1998

Answers

The bank could sell the mortgage to someone else (another bank or mortgage company), transfering your obligation to the next party, who doesn't have your bank account. I find that most mortgages I have taken out have been sold to some other mortgage servicing firm every few years.

Along the line of the question, I recall reading a few years ago about someone who had a big loan from a bank or savings and loan, and a deposit of equal amount - considerably over $100,000. The institution went bankrupt. The government insurance agency (FDIC or FSLIC) paid the depositor only $100,000 (the insured limit), while still demanding that the full loan be paid off. ............

-- Dan Hunt (dhunt@hostscorp.com), June 26, 1998.

High-equity properties... assuming that the high equity is in the hands of the home"owner", the bank/forecloser can't keep the whole thing. I believe the homeowner gets back the principle (principal?).

Foreclosure properties, at least around here, are sold at auction -- so if the homeowner has nearly paid off the loan, the bank could stand to lose more than they would if they just wrote off the loan (i.e. the high bidder offers less than the principal paid).

If you have a good chunk of $$$ laying around, though, it might be possible to buy up a nice foreclosure in 2000 for a song.

-- Larry Kollar (lekollar@nyx.net), June 26, 1998.

The bank has the first claim. Suppose you had a house you think is worth $150,000, and you owe a mortgage of $60,000. If you failed to meet the payment, the bank would foreclose, and auction it off. If they got $65,000 at the auction, they would be happy - they keep $60,000 and give you the rest. If they got $55,000 at the auction, you would still owe them $5,000. So the people most at risk are the people who owe the least, not the people who owe the most. I you owed 145,000 on a 150,000 house, they would have a hard time getting the mortgage principal by auction - so they will probably be a lot more willing to keep you in the house trying to make some payments. <<<<<>>>>>.....

-- Dan Hunt (dhunt@hostscorp.com), June 28, 1998.