Just a small rant

[jerry wagner]

Wilma, it is a case of all of the above.

1.Most of the loans the collateral would cover the loan when it was written.  There were unspoken agreements between appraisers and lenders that properties needed $x to meet a loan and appraiser (I'm sure) would take that into consideration, I've seen it happen, however that is a large percentage of the asset value.  What has occurred is that home sales have fallen so drastically that there is a glut on the market and that has dragged down home prices, destroying the collateral value.  Furthermore, foreclosures ALWAYS sell for less than the same home selling conventionally, thus the 50% average we are sitting at right now.
2.IT WOULD BE more logical for banks to choose to modify the term/interest rate/payment amount than to foreclose in the current situation, however, not all banks have (for some reason??) actually done so.
3.Sure its a country of free enterprise, however, I personally believe in the value of the FHA.  I believe that the government should have available a program to help consumers purchase a home.  Should you not believe that, fine, it is your own opinion, but is my belief.  Furthermore, as I said in my original post, if the federal government had structured this to allow the FHA to refinance the consumers, two things would have happened: yes, you would have an increase in default rate @ FHA, however that would be marginal against the net profit drawn through fees that the FHA charges to insure the loans, and secondly, we would have avoided a large portion of the foreclosures that have happened since FHA works harder to avoid foreclosure (this will have stabilized to some degree the decline in home sales as consumers avoid purchasing due to a fear of recession (consumer=2/3 of the economy))
4.Yes, our home prices were inflated due to the housing boom as that is normal for a boom/bust cycle, however they probably still have more to fall.

[pam]

Your number two is the one I can't figure out either. It makes sense that most of the people in trouble could make their payments and keep their houses if the bank would cut them enough slack to do it. There are a lot of factors causing people to miss their payments including job loss and raisin prices, not very many are actually just not even tryin. Go ahead and take those few out and give the others a break. But common sense rarely figures in the world of big finance.......