That can't EVEN be possible, Who's been in charge of this process for the last two and a half years, anyway?
Posted on 07/04/2009 10:37:46 PM PDT by Steelfish
JULY 3, 2009
New Evidence on the Foreclosure Crisis
Zero money down, not subprime loans, led to the mortgage meltdown. Article
STAN LIEBOWITZ.
What is really behind the mushrooming rate of mortgage foreclosures since 2007? The evidence from a huge national database containing millions of individual loans strongly suggests that the single most important factor is whether the homeowner has negative equity in a house -- that is, the balance of the mortgage is greater than the value of the house.
This means that most government policies being discussed to remedy woes in the housing market are misdirected.
Many policy makers and ordinary people blame the rise of foreclosures squarely on subprime mortgage lenders who presumably misled borrowers into taking out complex loans at low initial interest rates.
Those hapless individuals were then supposedly unable to make the higher monthly payments when their mortgage rates reset upwards.
But the focus on subprimes ignores the widely available industry facts (reported by the Mortgage Bankers Association) that 51% of all foreclosed homes had prime loans, not subprime, and that the foreclosure rate for prime loans grew by 488% compared to a growth rate of 200% for subprime foreclosures.
(These percentages are based on the period since the steep ascent in foreclosures began -- the third quarter of 2006 -- during which more than 4.3 million homes went into foreclosure.)
Sharing the blame in the popular imagination are other loans where lenders were largely at fault -- such as "liar loans," where lenders never attempted to validate a borrower's income or assets.
This common narrative also appears to be wrong, a conclusion that is based on my analysis of loan-level data from McDash Analytics, a component of Lender Processing Services Inc. It is the largest loan-level data source available, covering more than 30....
(Excerpt) Read more at online.wsj.com ...
If someone is way upside down on their mortgage, it makes financial sense to stop making payments and let the property go into foreclosure; and save the money normally used for payments to prepare for the time when you are forced out.
Not wise in all case, but a lot more than you would think.
That can't EVEN be possible, Who's been in charge of this process for the last two and a half years, anyway?
Get me a Harvard professor...surly they cant be right..........DUH!
The funny part is that banks are sitting on real estate right now. Not even putting houses in the market since they know the moment they do prices will plummet...
Obama is pumping more printed money into the economy trying to re-inflate the bubble. It wont work in the long term... Whoever is elected in 2012 will have to deal with the Obama crash whose seeds are being sown right now.
I think the bank will make you pay the difference if you do. If you owe more than the bank can sell it for, you will pay the difference. Therefore, it’s not such a good idea to walk away from it.
Putting any money down on a house is a waste of resources. It just puts more money in the banks pockets up front, and less in your account, money that can be more productively used to improve the property and handle ownership expenses. Even with no down loans, there is still several thousand dollars required in closing costs. A down payment is money never to be seen again, unless one was able to sell before the crash and profit on the increased equity.
Banks allowed these no down loans because house values were increasing, and were increasing for several years. The banks knew that even with a no down loan the buyers were seeing equity build up. Until the crash hit.
I think despite what this article says, After the crash, many home owners would still lose their built up equity along with any down payment they had made. By saving the down payment dollars, at least they might still have something to live on.
I enjoy Liebowitz. A good conservative thinker/writer.
But ... where houses have positive equity, there is no need to endure foreclosure. The owner could always sell the house and have a residual to keep. So it would seem that these results are not in any way surprising or inconsistent with other hypotheses.
The Bank cant make you pay the difference the house is security on the loan. The bank assumes the risk. Or the VA if its a VA loan.
I’m pretty sure I read that they can nowdays. I think I read that some banks started changing the fine print on their loans several years ago.
Hmmmm It might be different state to state... I would certainly check into it before I did it.
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