Why don’t banks drop the value of the house to stop the Foreclosure problem?
Many homeowners are underwater (owing more than the house is worth). Most of these homeowners would stay in the house and continue paying their mortgage IF the bank would lower the value of the house. BUT the bank would sooner foreclose on the homeowner, drop the house value and sell it again at the lower value but never to the original homeowner. Can someone make sense out of this stupidity.
I don’t see why responders don’t see that the ONLY solution to the housing crisis is to stop the foreclosures as quickly as possible.
You seem to have forgotten the simple fact that the bank gave the homeowners cash money to buy the house. The house has been purchased, the mortgage is not buying the house, it is repaying a cash loan. This is not stupid, as you are the one over looking the fact that the bank already gave the homeowners money. Loans are repaid based on the amount borrowed, not the present value of the item purchased.
Realtoratheart
19 Jan, 2011
Because they have loaned money against that value, meaning they would lose money. Heaven forbid they should look at this as a human issue and not a money issue. I have been screaming now for 6 years that I think they should split the loss between the homeowner and themselves and keep a home from foreclosure and keep a client. Ya know like The Bailey savings and loan. That’s just not in the cards I guess.
References :
Eddy T
19 Jan, 2011
Banks foreclose the mortgage properties because the mortgage borrowers did not pay their mortgage payments. The drop in the value of their house is not the cause of the foreclosures..
References :
Beverly S
19 Jan, 2011
Should the car companies drop the payments on your car because you are upside down the minute you drive it off the lot?
References :
ASK88
19 Jan, 2011
The money the banks lend the home owners are funds that ar borrowed from depositors. The depositors are sharehoders , pension funds, indivduals that put their funds in the bank in good faith. The persons that borrowed the funds are the ones that are responsiable. They borrowed these funds under a contract knowing all rules.
References :
Landlord
19 Jan, 2011
You seem to have forgotten the simple fact that the bank gave the homeowners cash money to buy the house. The house has been purchased, the mortgage is not buying the house, it is repaying a cash loan. This is not stupid, as you are the one over looking the fact that the bank already gave the homeowners money. Loans are repaid based on the amount borrowed, not the present value of the item purchased.
References :
acermill
19 Jan, 2011
Gosh, should they do that for everyone, even if they’re not facing foreclosure ? Or should they only do that for those who happen to owe more than the house is worth ? What about those folks who formerly had equity in the house, only to see that equity vaporize when THEIR property values dropped ? Stop to think about what you suggest.
References :
philospher77
19 Jan, 2011
Banks have no control over the value of the house. What you really want banks to do is to forgive part of the loan that people took out. Here’s why that’s a bad idea.
Let’s say that Bob has worked hard all of his life, and managed to save 100K. He decides to deposit that in a bank and earn 3% interest. Sue wants to buy a house, and goes to the bank to get a 100K loan at 6% interest. The bank takes Bob’s money, gives it to Sue, and then uses the interest that Sue pays to cover the interest that they pay Bob, plus to cover expenses, etc. If the market drops and Sue finds out that she can only sell her house for 50K, that’s bad for Sue, but entirely separate from the fact that she borrowed 100K to buy the house. If the bank agreed to waive 50K of what Sue owes, what happens when Bob wants to withdraw his 100K and use it to go a trip around the world? The bank would have to get the money Bob wants from other people’s deposits (which is why you can’t just walk into a bank and withdraw that kind of money… you need to give them several days notice). If only a few people do this, then the bank can cover the difference with the interest from the people who are making payments. But if enough people ask to have parts of their loans forgiven, you get to a point where the bank can’t cover its deposits, and then you have a big problem. In this case, Bob is lucky, because the FDIC will cover his deposit. But that’s government money. And where does government money come from? Taxes. And if enough banks go under, then you have an even bigger problem.
So that’s partly why banks do not want to just lower the amount that people owe. Quite honestly, the fact that their house is underwater is immaterial unless they are trying to sell it. The problem comes up when people lose their job, or have an adjustable mortgage, and can’t afford the payment.
References :