Story Comments

This comment is below the standard viewing threshold View It »

The same kind that let borrowers refinance and take equity out of the house that in reality, wasn't worth any more than the price paid. It's the same thing in reverse. All real estate is based on comps.

Most of those inch-thick lending documents contain draconian provisions to let the banks protect themselves.

0 Replies

This comment is below the standard viewing threshold View It »

Wtagg

"I laugh at the horror espoused by so many about socialism. Much of our current market is either based upon socialistic models, like the banking industry, or is an almost perfect socialistic model, like the insurance industry."

Those are exactly the things that need to be ended. Anyone who isn't horrified by socialism is a fool or they plan to be part of the ruling class. Did you note Red's comment at the top of the thread? When the government takes charge of private property then we are not longer free people. What is it about government stealing our private property and, therefore, liberty that you don't understand?

Btw, please explain and expand your insurance socialism and bank theory. I'd like to see just how you think that works, of course, the insurance industry is not the government and neither those companies nor banks are unable to take our private property like the government can and does on a whim. Try again.

0 Replies

This comment is below the standard viewing threshold View It »

So far as I know, any mortgage with a term shorter than its amortization. They can't demand more on the existing mortgage... but the existing mortgage expires on X date, and they won't refinance unless the principal is reduced to Y.

0 Replies

This comment is below the standard viewing threshold View It »

Would you lend someone 130% of the value of a home? If the home (or collateral) devalues to the place it is well below the loan amount, the loan becomes high risk. The loan provider cannot have the expectation of the full loan amount being recovered upon sale if the need for foreclosure arises. It does not reflect upon whether or not the home owner can continue to pay or not. The loan is at risk because the value of the collateral is well below the value of the loan.

You hold a loan at the pleasure of the loan provider. If the value of your collateral (home) depreciates below the loan amount, the loan provider can call the loan. This usually does not come into play unless the housing market falls.

Like now.

I did not say it absolutely will happen. I said it can happen. A financial institution should look at its holdings in such a market to determine its current risk. Risk is a fluid thing. My point is that loans that were not considered risky 8 months ago, could be risky currently due to changes in the market itself, even though the home owner is continuing to meet payments.

Judging a loan based purely on whether a home owner can meet a payment at the closure of the loan is simplistic and naive, not to mention, incredibly for bad business. Conditions change over the life of the loan.

What about all the interest only loans that were popular, especially with house flippers, a few years back? The assumption was that equity would be provided by the market, not the home owner. In the current market, those homes would almost certainly fail an appraisal vs. loan amount test.

0 Replies