I am having a difficult time understanding the foreclosure crisis

[DainBramaged]

Lets forget the rush to foreclose and the criminal activity (possibly) being performed by the lenders. How can the banks recoup their losses if they loaned money during the bubble, while homes have depreciated at record levels? There cannot be enough mortgage insurance to cover their losses. And why isn't it in their best interests to at least have someone living in the home KNOWING market to sale time is taking way longer than it did even a year ago with the tightening of lending? Why can't they work out rental agreements with the defaulted owners if they can't work out repayment plans?


Why is this so difficult for these companies? What can possibly be in it for them? Detroit is turning to farms again, who recovers the losses? The lives broken?

[truedelphi]

1. I keep thinking about how wise the government in Ireland was.

You see, they "Bailed out" their Bigger Financial Interests also.

But the Irish government STIPULATED that due to the fact that the public largesse was providing the Bailouts, then among the Toxic Assets items that would be charged off due to the Bailouts, would Be the mortgages that are in trouble. The stipulation was that the Big Financial Interests must respect the people in the homes facing foreclosure.

In other words, Government Money was handed to Banks (same as was done here.)

But the difference was this: The Irish government said, "Since we are covering your huge losses, among those losses are homes that were sold at over-inflated prices. And since we have had you charge those home mortgage costs against our Monies for the Bailouts, you must leave the homeowners alone and see that their mortgages are covered by these monies."

As a result, the foreclosure rate is much lower. The housing market is more stable.

We gave the government twelve to fourteen trillion to give to our bankers, so much money that each taxpayer now owes the Government some $ 13,000 +. Yet no relief has been provided to the mortgage holders. Only 4% of the people that could have been helped by Obama's much touted Several billion dollar mortgage re-mod program have been offered any help.

In fact, the Monies offered as Bailout Payments went to pay off the Toxic Assets incurred by the Credit Default Swaps and other nasty gambling devices that the Big Finance People sunk so much money in.

It is as though our government was pouring blood transfusions into a hemorrhaging patient without first stitching up the hemorrhage!!


Here in the USA, whenever you listen to anyone ranting and raving about the Government helping out the people to be foreclosed on, you hear the same story with statements like: "I pay my mortgage, and so the foreclosed upon should either pay up or move out."

But they overlook the fact that if 40% of their neighbors end up getting booted out, their home won't be worth a thing.

Right now the house I am living in and paying rent for would only be worth $ 150K on the market, due to the fact that three foreclosed properties sit right across the street. One of them is selling for $ 94 K, with perhaps another $ 15 K needed for damage repair.

This house was worth over $ 345 K back in 2005, when my landlord bought it.

[ejpoeta]

6. would have probably been smarter to give that money to homeowners to pay off their loans

then the banks would have their money and the homeowners would have their houses and there would be no foreclosures at all. then the homeowners could pay extra in their taxes or something until they repaid the money from the government. wonder what that would have done.

[CountAllVotes]

2. the problem with your proposal is simple

it suggests we envelop something called the common good of the American people. Your idea is something called American and shows true American values.

This cannot be embraced by those whose lives embrace the corporate monster. Greed does not recognize something called the good of the people.

Greed is indeed evil. It knows no end.

[spin]

11. We all serve the machine. (n/t)

[Vincardog]

3. The Banksters NEVER want to admit the extent of their FRAUD in creating the Toxic "assets". Any

examination of them will lead inevitably to CLEAR CRIMINAL activity on a scale that had to be sanctioned no required by the PTB.

[DJ13]

4. Look at it another way

The banks had already covered their expense on the mortgage when they securitized those loans.

In fact they made a killing.

[stopbush]

5. Because at present, the "losses" the banks are suffering are a drop in the bucket

compared to the trillions they continue to reap from homeowners who are current on their mortgages.

The average 30-year mortgage works out to the homeowner paying for his home two and a half times. That's right. A 30-year mortgage on a $200,000 home @ 7% interest will cost $480,000 over 30 years (principle + interest).

Do the math. There's a lot of room in there to absorb mortgages that are not being paid (not to mention the fact that they securitized those mortgages and have already made a killing on them as a derivative).

In addition, a lot of people got trapped into predatory home loans that were loaded up with ballooning payments. The banks would give you a interest-only loan with a fixed rate for two years with the "possibility" of doing a re-fi after two years into something else to avoid the ARM that kicked in at year three. But you can't do that when you lose your job, so the ARM kicks in and a monthly mortgage payment of $1500 suddenly balloons to $3,000. That added $1500 a month is gravy for the bank if they get it (and a sucker bet for the homeowner), while being only a paper asset if they don't get paid.

The bank is only on the hook for the amount of principle it financed, and if the bank forecloses, they still own the home and carry it as an asset, ready to sell it to the next hapless homeowner who thinks he's getting the deal of a lifetime.

[mzmolly]

7. Good question. Here's a short explanation.

http://fatcatexecutive.com/2009/07/loan-modification-scam/

More from Alan Grayson.

http://www.informationclearinghouse.info/article26507.htm

Banks also profit from dragging out modifications.

http://www.shortsaledesmoines.com/?p=122

[DainBramaged]

9. Thanks it helped a lot!!!

:hug:

[mzmolly]

10. No problem. It's confusing to be sure.

:hi:

[n2doc]

8. Personally I think they are working on the side to make money on the repos

It goes like this: Foreclose, sell at deep discount to a "foreclosure flipper" who is associated with the financial institution, go to the Government to cover that initial loss, and then make money when the flipper sells as a profit to another person. I don't have proof of this but it makes a lot of sense, drive prices way down so that the bubble can be re-inflated again.

[jmowreader]

12. You left out a bunch of stuff

The "bank" doesn't lose a nickel when the house is foreclosed on. The joy of structured finance is, it COMPLETELY eliminates risk--to the originating bank, at least--in the mortgage market.