Roger Schlesinger

Does it matter that the headline is correct or do you believe I am just splitting hairs? If you owe a bundle how important is the fact that the parameters of the debt can be widely different? Is unsecured debt really unsecured? Why is mortgage debt generally superior to all debt? If you fail to understand the differences in debt, the nuances of the questions and

the need to be able to move to correct the mistakes, you will spend a great deal of your life being the odd-man out.

Let us start with credit card debt, which most people will tell you is unsecured (not attached to any of your assets). In reality this debt is more secured than specific debt such as your home mortgage and your automobile. Why? Because the credit card companies have spent a "ton" of money to make sure you cannot discharge their debt through bankruptcy as easily as you used to be able to. Unsecured debt is really secured by all of your assets while specific secured debt is just secured, for the most part, by the asset used for security. Failure to make your car payment and your car will be reposed. If their is a deficiency after the repossession it generally is written off.

Mortgage debt is secured but definitely different than normal secured debt. In most states if you take out a mortgage to purchase a house it is considered a "purchase money" mortgage. That term used to be reserved for a mortgage given by the seller of the property

to the buyer. Again in most states it simply means the mortgage you take to buy the house regardless of who is giving it to you. These mortgages, purchase money, are deficiency free, again in most states. In other words you can walk away from the property without any worry about any loss to the mortgage holder. THIS IS NOT TRUE FOR REFINANCED MORTGAGES! (however it can be - read on).

In states where a mortgage is really a note secured by a deed of trust the holder of the note can foreclose on the borrower if payments are missed by electing to sell the house at a public auction to the highest bidder, after sufficient notice is given. If that occurs and the buyer loses the house all liability is dismissed in case of a loss.(Coincidentally, the current owner can go to the foreclosure sale and buy the house from the lender who is foreclosing on him. When that happens, rarely, it is really a form of public negotiation.)


Roger Schlesinger

Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.

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