Comments on: Why did the loan-sharks prefer to sell foreclosed houses at auction rather than charge “normal” interest rates

By: Jacob W

Jacob W — Wed, 24 Feb 2010 07:35:07 +0000

What everyone seems to be ignoring is that the vast majority of these mortgaged purchases were purely speculative. Here is what I mean.

The housing market was hot. People were buying like crazy. Enter the speculator. The process was to buy a very nice, high-end brand new home that the builder is anxious to sell. You put no money down and take out an extremely low rate interest only loan that is gauranteed not to increase for three years or so. Now, place the house back on the market for a high price, sell it, pay off the loan and keep the profit. In a hot market that could sometimes be as high as a 25% profit with little or not cash outlay.

Also figure in, some speculators believed that if they were not able to sell the house they could always turn around and re-finance into a normal fixed rate mortgage.

The problems began with the cooling down of the housing market. Suddenly, the specutators could not sell the house. They sought to re-finance it but had no equity. A standard mortgage requires a substancial down payment. The speculators had no intention of throwing more money at this house in which was already worth less than they owed. So, they just mail the bank the keys.

Very few of these mortgages were taken by families to buy their primary residence. And so what if they did? Are we to allow them to keep a house they really cannot afford? These are mostly brand new very high end homes. I, a responsible homeowner who did not buy more house than I could afford have to live in my modest home while they get to live in brand new high end houses in fine neighborhoods while I and the rest of the resonsible taxpayers will foot the bill?

I think not!

By: sweetwaterfish

sweetwaterfish — Sun, 21 Feb 2010 08:35:44 +0000

You are mixing apples and oranges! If a bank auctions a house, often times they are not financing it at all. The auction is still a loss to the bank. I have bought dozens of forclosures through the years, and the banks are LOOSING money in that deal, even more so these days, but it is still better to loose the money now than to have that asset hanging around. A house needs maintenance, you’ve got to cut the grass, keep the power on, etc and make it look good to have a “sale-able “assest. Many time the banks would rahter just cut their losses and move on.

By: Patrick G

Patrick G — Thu, 18 Feb 2010 02:49:08 +0000

Wow…. you don’t know much about the subject do you?

It’s not the banks or lending institutions greed that got people into financial trouble. It is the homeowners ego. People wanted homes that the couldn’t afford. They bought into the 1% interest only loan and ignored the fact that in 5 or 7 years the rate would adjust.

How is it the fault of the lending company that the people buying the home either failed to read or chose to ignore part of the contract.

Why is it my fault for that matter? Why are my tax dollars being used to bail these idiots out?

By: sparhawk7322

sparhawk7322 — Tue, 16 Feb 2010 07:52:42 +0000

Why did the idiots not read the mortgage contract? If they had had a brain they would have locked in a low fixed rate instead of an ARM. At least as much blame should fall on the buyers for not being smart consumers.

By: People A

People A — Sun, 14 Feb 2010 23:59:04 +0000

Faster turnover means less upkeep and liability, less utility bills to pay, less homeowner’s insurance to pay and less real estate taxes to pay, etc.

By: CHARITY G

CHARITY G — Thu, 11 Feb 2010 13:22:45 +0000

Because from an accounting stand point, you want bad debt off your books as quickly as possible . . . because a lot of these homes are already upside down . . . and lower interest rates will not negate the negative equity in the initial loan . . .

By: Dr Watson (UK)

Dr Watson (UK) — Wed, 10 Feb 2010 15:42:58 +0000

Don’t want a wait too long for profit?

Edit; You know the answer to your question. Even traditional banks don’t give a $hit for their customers, hence lending moneyy 5 times wages etc. Profit is God and we’re on our own, always remember that as you obviously do!!