John Adams asked:
> Let's say I default on a mortgage and the bank takes the property,
> and after they sell the property, they only get half of what I owe
> them. What happens to the other half of the debt?
I see that our lobster lawfirm has pretty much all weighed in, so let me add my bit:
It depends on whether the mortgage is "non-recourse" or not. Some are, some aren't. A non-recourse mortgage - the norm in commercial mortgages, i don't know about home mortgages - means that you cannot ever owe more than the value of the property at the time of its sale at foreclosure. This has interesting (for lawyers, that is) consequences if real estate taxes have not been paid, and for taxes if depreciation has been taken.
A very rational strategy in a bubbling market is to non-recourse refinance up to fair market value, & walk away from the property with the cash when the bubble collapses...
john mage