Why are the bank, loan companies, & mortgage companies forcing home owners into foreclosures?
Wouldn't those companies make more money if they allowed everyone to keep their house and lately lower their payment to something more affordable? Not only would they still be getting some money it would comfort the mortgage crisis. Correct me if i'm wrong.
Answers:
Lots of great answers.
I have one point to add. That is the issue of "Moral Hazard".
Let's say aloud I'm upside down in my home and facing foreclosure because my ARM adjusted, and I budge to my bank and ask to not only acquire a low fixed rate, but also to have the lender knock $100,000 off my loan be a foil for. They agree. Later that month I tell my neighbor about the great buy and sell I received. He's current on his payments, but because he bought at the same time that I did, he is also upside down in his property.
What does he do? He stops making his payments and when foreclosure is file he'll expect to receive the same sweetheart deal that I received.
Then let say my house drops another $50,000 in good point. What do I do? I stop making my payments again and wait for another sweetheart deal from the hill.
Where does it end? Multiply this by millions of homeowners and you quickly verbs that this slippery slope will actually drive home values down further than foreclosing on homes where those cannot afford them and selling them to people who can.
I believe that in the long run the reduction and even the people who lose their homes will be better off. Get the make worse down now, quickly and agree to us all start to rebuild.
Mr. Financial Freedom
http://www.5stepstofinancialfreedom.com
If a place is worth 200K and the mortgage is for 250K and the owner can't afford 250K but could afford 200K then I'd vote absolutely they should lower the mortgage. They are only going to acquire 200K if they sell the place (plus have huge costs) so they may as very well lower the mortgage in this case.
However, suppose the place is worth 200K and the mortgage is 250K, but the owner can solely afford 150K. In this case the bank would product money (or at least lose less money) by taking the place put money on and re-selling it (assuming they really could get 250K for it).
I agree that in masses cases (maybe most cases) the bank would be better off adjust the loan and working with the seller, but without doubt not it all cases by a long shot. Alsom the banks do work beside the sellers in tons cases but I suspect not nearly enough. Part of the problem may be they are just big unwieldy corporations that enjoy trouble getting this sort of think done and maybe contained by part they are still figuring this adjectives out. Anyhow, I agree that banks should do this more.
You are wrong. Here is why.
First of adjectives, you need to understand how a dune works. I deposit money into the bank. The bank take this money and makes loans with that money. The difference surrounded by interest between what they pay me to borrow my money and what they loan it out for is the source of a bank's operating income and profit. Out of that difference they have to reimburse for salaries, buildings, etc.
Although much larger than this (many people's deposits and loans are all mixed together), let's donate a simple example. I deposit $100,000 in the bank. The dune lends my $100,000 to you to buy a house. They give me anywhere from 1% on my money (if it's a simple stash account and I can go and emergency it at any minute) to 4% (if I promise not to use it for 5-10 years) and they are charging you 6.25% for the same money. They will make the difference, the 5.25% on it (or one and only 2.25% if I have it in a CD) over the year or a total of $5250 (not profusely, right?) or $2250 (even, less).
The issue becomes when the money isn't paid rear. I expect my interest payment to posted to my account. If you aren't paying the loan subsidise then they can't pay me the interest. If they aren't paying me the interest, I might move about and demand my money back. Now the hill could be in serious trouble, they lent my money to you to buy a house. You aren't paying it back. They own to find a way to give it put money on. If they can't, they are considered insolvent and the bank can fail.
Banks are required to hold a certain percentage of their assets in change (so that a certain amount of people can jump ask for their money and they have it). Banks are required to do something about unpromising debt because their balance sheets state that they a certain amount of income coming within. If that income isn't coming in then they enjoy to try and recover their money. The only opening to do that is to foreclose. They need the asset wager on so that they can sell it and recover some of the money. If they lowered the wage or the amount of the loan, they have to find a replacement for that income stream or they have to own more depositors put money into the bank to keep themselves solvent. If they don't do it, they fall short.
The greater % of bad loans a company has, the more feasible it is to fail.
It wouldn't help the mortgage crisis, it would drag it out over years and years. Many would backfire (still a good chance that several will fail). Some of those people who were 'helped' beside lower payments and loans would still default. It would extend the problem by years.
good luck!
You are right but the loans are set up to generate money for the bank and by extending it they will lose there investors. On top of that. Banks are foremost for spending the money before they receive it so to make so they are using the citizens that buy and sell homes to make the money they inevitability to satisfy the investors. Which has created the crappy circle.
THis is lone what I see no experience.
Why do you think that here is such an uproar about the bail out program? I'm against it as why should I pay for someone to maintain their home when they couldn't plan and budget properly in the first place? You know damn well that if this plan is implement the tax payers will flip the bill. I really don't care if the bank make money as their as big a problem as the borrower's are. they got greedy as in good health, why should they continue to make money. This society and discount has been contained by fantasy land for too long, this crisis is long overdue and is prerequisite to correct the issue. Why make a home more affordable, so they can go out, spend more money and still not take-home pay? This is an arm loan, just in a different format, if you lower a sum, the natural tendency is not to let go but spend. Keeping people in their homes will not solve the problem, borrowers necessitate to get realistic and swot up how to budget, save and stop using homes as atms. Lenders need to stop approving loans lacking verifying income (still available in some markets) and contained by my opinion, stop offering interest only loans, adjectives they really do is create illusion, not value Source(s): mortgage broker
some got the answer some answered sector of it... this whole bank issues next to laons, foreclosures are deeper then what the media portrays.. but i wont get hold of into details except...
1. collateral debt obligations / hedge funds
2. monetary policies (fiat currency)
3. fractional reserve bank
NOW to answer your core question... yes the banks are taking smaller quantity then what people owe... its call a short sale (to sale to a exotic buyer - while the bank "forgives" the lopsided loan amount).... if the current owner can show they can still make payments if the rates are fixed (the populace who are having adjustibale loans) then you can request for a loan modification... if you lately lost your job and need a conditional help then you can request for a neediness forbarnace...
Why should they?
You obviously have no view of how banks make money.
They generate money on the interest and closing costs of transactions, and they don't always lose money on foreclosures either, especially if near is alot of equity.
Funny that you aren't even mentioning the LEGALY RESPONSIBILITY of people that bought houses that the couldn't afford, lied about their income on stated income loans, and want to hold their cake and eat it to.
I DO NOT feel sorry for these family!
Only the ones that were victims of fraud.
Not solitary would they make more money but our economy would be better. There are loss mitigation companies that can assist people save their homes thru loan modifications near their lender. Not much news is going out about it though. Source(s): http://www.foreclosurelight.com/
I wish it were that simple. When you buy a house and attain a mortgage you sign a contract. It is not only with the dune, but you are in essence being loaned the money by adjectives the depositors of that bank. Us the people who loan you that money. The hill is our "broker" lending our money to "credit worthy" people. The house is the asset, the house is the property of the ridge, until the mortgage has been compensated in full and the transaction is completed. If the debtor defaults on the loan, it become the full property of the bank, and the debtor "loses" the house. the asset (house) stays the property of the bank. An Asset, beneficial to the owners, or us the depositors to the guard, Unfortunately there are too many 'foreclosed" homes on the bazaar, and the Banks are having a difficult time selling the asset to make $$
Isn't it rather bit different picture when you think of it as YOUR money being loaned out at hand?
I don't know if I would want my Bank to "forgive" the debt and allow the debtor to stay in the house (asset) at a reduced dollar amount, perhaps solitary as a renter. Until the Asset could be then sold at a profit, thus making money for us the depositors.
There were clearly many unscrupulous brokers out there selling "bleak loans and really raking in the commissions. A lot of society with really questionable credit got Million dollar homes which they never really could afford .
I discern sorry for everyone out there who is in a financial dilemma. But I can't support but wonder if they were just one a little too greedy and made bad decision. Or lost their jobs; or whatever. We a short time ago live in tough times. SORRY!
Related Questions:
What is the best mortgage co. for first time home buyers surrounded by FL?
If I am putting 30-50% down on a home purchase, how will my subprime credit affect mortgage approval?
Can I lower my interest rate if I already enjoy a mortgage on a home?
Is it possible to be a stay at home single mom and afford a mortgage?
Can you owner-finance a home to another buyer if you still own a mortgage on it?
Answers:
Lots of great answers.
I have one point to add. That is the issue of "Moral Hazard".
Let's say aloud I'm upside down in my home and facing foreclosure because my ARM adjusted, and I budge to my bank and ask to not only acquire a low fixed rate, but also to have the lender knock $100,000 off my loan be a foil for. They agree. Later that month I tell my neighbor about the great buy and sell I received. He's current on his payments, but because he bought at the same time that I did, he is also upside down in his property.
What does he do? He stops making his payments and when foreclosure is file he'll expect to receive the same sweetheart deal that I received.
Then let say my house drops another $50,000 in good point. What do I do? I stop making my payments again and wait for another sweetheart deal from the hill.
Where does it end? Multiply this by millions of homeowners and you quickly verbs that this slippery slope will actually drive home values down further than foreclosing on homes where those cannot afford them and selling them to people who can.
I believe that in the long run the reduction and even the people who lose their homes will be better off. Get the make worse down now, quickly and agree to us all start to rebuild.
Mr. Financial Freedom
http://www.5stepstofinancialfreedom.com
If a place is worth 200K and the mortgage is for 250K and the owner can't afford 250K but could afford 200K then I'd vote absolutely they should lower the mortgage. They are only going to acquire 200K if they sell the place (plus have huge costs) so they may as very well lower the mortgage in this case.
However, suppose the place is worth 200K and the mortgage is 250K, but the owner can solely afford 150K. In this case the bank would product money (or at least lose less money) by taking the place put money on and re-selling it (assuming they really could get 250K for it).
I agree that in masses cases (maybe most cases) the bank would be better off adjust the loan and working with the seller, but without doubt not it all cases by a long shot. Alsom the banks do work beside the sellers in tons cases but I suspect not nearly enough. Part of the problem may be they are just big unwieldy corporations that enjoy trouble getting this sort of think done and maybe contained by part they are still figuring this adjectives out. Anyhow, I agree that banks should do this more.
You are wrong. Here is why.
First of adjectives, you need to understand how a dune works. I deposit money into the bank. The bank take this money and makes loans with that money. The difference surrounded by interest between what they pay me to borrow my money and what they loan it out for is the source of a bank's operating income and profit. Out of that difference they have to reimburse for salaries, buildings, etc.
Although much larger than this (many people's deposits and loans are all mixed together), let's donate a simple example. I deposit $100,000 in the bank. The dune lends my $100,000 to you to buy a house. They give me anywhere from 1% on my money (if it's a simple stash account and I can go and emergency it at any minute) to 4% (if I promise not to use it for 5-10 years) and they are charging you 6.25% for the same money. They will make the difference, the 5.25% on it (or one and only 2.25% if I have it in a CD) over the year or a total of $5250 (not profusely, right?) or $2250 (even, less).
The issue becomes when the money isn't paid rear. I expect my interest payment to posted to my account. If you aren't paying the loan subsidise then they can't pay me the interest. If they aren't paying me the interest, I might move about and demand my money back. Now the hill could be in serious trouble, they lent my money to you to buy a house. You aren't paying it back. They own to find a way to give it put money on. If they can't, they are considered insolvent and the bank can fail.
Banks are required to hold a certain percentage of their assets in change (so that a certain amount of people can jump ask for their money and they have it). Banks are required to do something about unpromising debt because their balance sheets state that they a certain amount of income coming within. If that income isn't coming in then they enjoy to try and recover their money. The only opening to do that is to foreclose. They need the asset wager on so that they can sell it and recover some of the money. If they lowered the wage or the amount of the loan, they have to find a replacement for that income stream or they have to own more depositors put money into the bank to keep themselves solvent. If they don't do it, they fall short.
The greater % of bad loans a company has, the more feasible it is to fail.
It wouldn't help the mortgage crisis, it would drag it out over years and years. Many would backfire (still a good chance that several will fail). Some of those people who were 'helped' beside lower payments and loans would still default. It would extend the problem by years.
good luck!
You are right but the loans are set up to generate money for the bank and by extending it they will lose there investors. On top of that. Banks are foremost for spending the money before they receive it so to make so they are using the citizens that buy and sell homes to make the money they inevitability to satisfy the investors. Which has created the crappy circle.
THis is lone what I see no experience.
Why do you think that here is such an uproar about the bail out program? I'm against it as why should I pay for someone to maintain their home when they couldn't plan and budget properly in the first place? You know damn well that if this plan is implement the tax payers will flip the bill. I really don't care if the bank make money as their as big a problem as the borrower's are. they got greedy as in good health, why should they continue to make money. This society and discount has been contained by fantasy land for too long, this crisis is long overdue and is prerequisite to correct the issue. Why make a home more affordable, so they can go out, spend more money and still not take-home pay? This is an arm loan, just in a different format, if you lower a sum, the natural tendency is not to let go but spend. Keeping people in their homes will not solve the problem, borrowers necessitate to get realistic and swot up how to budget, save and stop using homes as atms. Lenders need to stop approving loans lacking verifying income (still available in some markets) and contained by my opinion, stop offering interest only loans, adjectives they really do is create illusion, not value Source(s): mortgage broker
some got the answer some answered sector of it... this whole bank issues next to laons, foreclosures are deeper then what the media portrays.. but i wont get hold of into details except...
1. collateral debt obligations / hedge funds
2. monetary policies (fiat currency)
3. fractional reserve bank
NOW to answer your core question... yes the banks are taking smaller quantity then what people owe... its call a short sale (to sale to a exotic buyer - while the bank "forgives" the lopsided loan amount).... if the current owner can show they can still make payments if the rates are fixed (the populace who are having adjustibale loans) then you can request for a loan modification... if you lately lost your job and need a conditional help then you can request for a neediness forbarnace...
Why should they?
You obviously have no view of how banks make money.
They generate money on the interest and closing costs of transactions, and they don't always lose money on foreclosures either, especially if near is alot of equity.
Funny that you aren't even mentioning the LEGALY RESPONSIBILITY of people that bought houses that the couldn't afford, lied about their income on stated income loans, and want to hold their cake and eat it to.
I DO NOT feel sorry for these family!
Only the ones that were victims of fraud.
Not solitary would they make more money but our economy would be better. There are loss mitigation companies that can assist people save their homes thru loan modifications near their lender. Not much news is going out about it though. Source(s): http://www.foreclosurelight.com/
I wish it were that simple. When you buy a house and attain a mortgage you sign a contract. It is not only with the dune, but you are in essence being loaned the money by adjectives the depositors of that bank. Us the people who loan you that money. The hill is our "broker" lending our money to "credit worthy" people. The house is the asset, the house is the property of the ridge, until the mortgage has been compensated in full and the transaction is completed. If the debtor defaults on the loan, it become the full property of the bank, and the debtor "loses" the house. the asset (house) stays the property of the bank. An Asset, beneficial to the owners, or us the depositors to the guard, Unfortunately there are too many 'foreclosed" homes on the bazaar, and the Banks are having a difficult time selling the asset to make $$
Isn't it rather bit different picture when you think of it as YOUR money being loaned out at hand?
I don't know if I would want my Bank to "forgive" the debt and allow the debtor to stay in the house (asset) at a reduced dollar amount, perhaps solitary as a renter. Until the Asset could be then sold at a profit, thus making money for us the depositors.
There were clearly many unscrupulous brokers out there selling "bleak loans and really raking in the commissions. A lot of society with really questionable credit got Million dollar homes which they never really could afford .
I discern sorry for everyone out there who is in a financial dilemma. But I can't support but wonder if they were just one a little too greedy and made bad decision. Or lost their jobs; or whatever. We a short time ago live in tough times. SORRY!
Related Questions: