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if your house is worth $500k and you owe $100k, you do not own...

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FlashFish

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29/03/24

20:23

Post #: 73120556
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Originally posted by Infose: ↑

"If you have a mortgage you are an unsecured creditor and they can demand instant payment or you forfeit."

How can a debtor to a bank that has mortgaged his/her property, that is, that has given his/her property as a security, be an unsecured creditor?

In order to be an unsecured creditor, you must have:

1) lent money to the bank, normally through the purchase of bonds issued by it, and
2) done so without securing your loan by having a claim over specific assets.

Furthermore, if a bank goes into liquidation, then in the worst possible scenario you would only be losing the money that you lent.

Note. We are not talking about deposit contracts, but about having unsecured bonds issued by a bank.

Only a debtor, not a creditor, can be served with a demand to pay.

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if your house is worth $500k and you owe $100k, you do not own your house, the bank does. you are in credit $400k at the current value. the banks can use that credit as collateral on their books as a hedge against other investments. therefore, if the bank falls over they have turned you into an unsecured creditor. goodbye house.
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