Most people think that walking out on a mortgage, negotiating with your bank for a short sale, or being foreclosed ends your debt to the banksters. In many states, it doesn't (CNN Money 2/3/10):

Former homeowners may still be on the hook if there's a difference between what they owed on their mortgage and what the bank could sell it for at auction. And these "deficiency judgments" are ticking time bombs that can explode years after borrowers lose their homes.

It can even happen to people who got their bank to approve them selling their home for less than it is worth.

In most states, the banksters can get away with this.

In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.

Some states, such as California, are "non-recourse" and don't allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims.

Be very careful if you are in this situation.

Releasing title does not necessarily end the debt. It's complicated because of variations in state law, but, generally, a mortgage has two parts: a pledge of collateral, represented by the home, and a promise to pay off the loan.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.

Zaretsky had one client who was so relieved to have arranged a short sale that he signed every paper his real estate agent shoved at him, even a confession that clearly stated he still owed the debt.

"He had no idea what he was doing," said Zaretsky. "All the lender had to do was go to court to convert the confession into a deficiency judgment."

If you aren't in financial trouble, but you just want to get out of a mortgage that is for more than the value of your house, be extra careful. Banks look at credit reports and are even more likely to go after deficiency judgements if your other bills are getting paid, which suggests that you are doing a "strategic default."

What the Article Carefully Avoids Mentioning

There is something even more sinister about this. The banksters set up a lot of predatory mortgages that were intended to take peoples' homes from them after they were paying off their mortgages for a few years by sending the interest rates through the stratosphere. Banksters hoped to seize the homes and sell them at a profit, not realizing that their greed and corruption would cause the housing market to tank.

Now, the banksters can collect the deficiencies and eliminate the risks they should have been assuming when they ran these scams in the first place.

The corporate media keeps scolding politicians not to side with populist anger over the blatant misconduct of the banksters. Yet, the behavior of the banksters gets more predatory and avaricious. The same banksters that nearly destroyed our financial system and who are ripping people off every chance they get are looting their own financial institutions by giving themselves enormous unearned bonuses, when their regular salaries alone would make them overpaid.

Here are some great quotes on banks and the people who run them.

It is easier to rob by setting up a bank than by holding up a bank clerk.
Bertolt Brecht

I hate banks. They do nothing positive for anybody except take care of themselves. They`re first in with their fees and first out when there`s trouble.
Earl Warren

But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.
Josiah Stamp

A bank is a place that will lend you money if you can prove you don't need it.
Bob Hope

Banking establishments are more dangerous than standing armies.
Thomas Jefferson

Whoever controls the volume of money in our country is absolute master of all industry and commerce...when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.
James Garfield, 20th US President
Assassinated, 1881

When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes... Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.
Napoleon Bonaparte, 1815

Photo: wot_nxt