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During the Great Depression, about 50% of homes were lost to foreclosure. Unemployment peaked at, I think, about 25% or 15 million. That was the outcome of doing nothing.
Hoover was the most interventionist president in America's history up until that time. Trying to keep wages afloat as well as farm prices. Unemployment occurs when wages are artificially maintained, ergo the high rate. Saying that Hoover was "laissez faire" is naive and foolish. FDR just stole the crown afterwards.
It is guaranteed that government intervention will cause more pain in the housing market. It will just be amortized over a longer period so the housing depression will just last a whole lot longer.
There will also be some who won't really have to pay. Just like in the depression, many people survived, and even thrived (the ones who planned and/or lucked out)
Bailing out some homeowners has nothing to do with homeowners/buyers and all to do with patching up a massive hole in the economy.
More Keynesian nonsense.
Homeowners don't need to be bailed out. Just let them rent out the house after being foreclosed on, allowing them to reconstruct their lives and the new owners to buy the house very cheaply to make repairs and upgrades.
FDIC was not around during the Great Depression. For now, there is an FDIC. For now, the FDIC is underfunded and cannot withstand a massive bank failure. For now, the FDIC is arranging marriages between banks and conessions to hold it all together. For now, it makes sense for banks to work with homeowners who have a prayer of staying in their home. For now, it makes sense, from a balance sheet perspective, for banks to not dump all foreclosed homes into the market, at once.
For now, it makes sense to stay on the hampster wheel, cause no one can comprehend the alternative.
You look at a house which is listed at $X. The contract is written up, the appraisal is done and the loan has been submitted to the lender.
What you don't know,however, is that the appraiser is told by the LO that "$X is needed to make this deal work". The appraiser falls for this pressure and appraises it at $X. The LO changes a few items on loan docs and submits the whole thing.
The lender doesn't do due dilligence, does not audit the loan file nor reviews the appraisal.
Ten years later you get sick and need money for your medical bills. You have always maintained your house well and you figure you have 10 years worth of equity in it.
You want to refi and actually encounter an honest LO who hires an ethical appraiser. Come to find out you paid $50K too much for your house and you are upside down in your mortgage.
Real story. Happens all the time.
And as a borrower, you should be able to expect that the people you deal with in this largest investment you will ever make in your life are ethical.
Since when is it the bank's job to make sure you don't pay more for a house than it's worth? I'm sorry, but I would expect that from someone who isn't familiar with the process. Not a RE professional. The bank is doing due diligence for its own protection, not for the borrower's.
Homeowners don't need to be bailed out. Just let them rent out the house after being foreclosed on, allowing them to reconstruct their lives and the new owners to buy the house very cheaply to make repairs and upgrades.
Homeowners don't need to be bailed out. Just let them rent out the house after being foreclosed on, allowing them to reconstruct their lives and the new owners to buy the house very cheaply to make repairs and upgrades.
And who is it, exactly, that is buying these houses and renting them back to tenants? Even if the landlords are the banks, how is it the tennants are going to pay a monthly rent that's even comparible to what the monthly mortgage was/is. This makes no sense. They are being foreclosed on for a reason and it's usually because they can't make the payments. And what do you do with the homes that don't need repairs or upgrades? Still allow them to be bought cheaply? Nice idea but completely unrealistic to ever work.
And who is it, exactly, that is buying these houses and renting them back to tenants? Even if the landlords are the banks, how is it the tennants are going to pay a monthly rent that's even comparible to what the monthly mortgage was/is. This makes no sense. They are being foreclosed on for a reason and it's usually because they can't make the payments. And what do you do with the homes that don't need repairs or upgrades? Still allow them to be bought cheaply? Nice idea but completely unrealistic to ever work.
It may not work, but by god they're going to try it:
The leases are "temporary," but in some markets, I'd bet that translates to years if need be.
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