Quote:
Originally Posted by Capt. Carrera
We would be outraged if the bank said, "Your house has doubled in value. We're altering the mortgage to reflect the fact. The principle and payments have doubled."
Yet we find it acceptable to bail on our obligation when the shoe is on th other foot, and the house falls in value...
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Of course.
The contract does not permit your first paragraph to happen. The bank could say that, but they would have no basis in the contract to make it stick. The bank could have tried to negotiate a provision which says the mortgage could be altered if the house doubled in value - but the bank did not do so.
Someone defaulting on payments is something which is contemplated in the contract. At the time of signing, the bank knew what its remedies were in the event of default.
Knowing that it is entering into a non-recourse loan (i.e., it can only look to the collateral in the event of a default), a bank with any common sense would take a real hard look at the current and future value of its collateral. The banks failed to do so, and the results are predictable.