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[shmike]

Originally Posted by Papa_Complex

Perhaps not but they can profit in the sale, of that property, and have received payments towards it. They make money, on virtually every foreclosure. Believe me; both my parents were in banking for their whole lives

I am assuming your parents are retired?

Once upon a time:

Joe & Mary put 20% down. If they made 5 years worth of payments and then defaulted, the bank would take back the home (that was probably worth as much as the sale price, maybe more). Since the bank had 20%+ equity in the acquired home, they would sell it and make money.

That is a very tough scenario to replicate in a down market, let alone a free-falling market. Add in the fact that many houses in the last few years were financed at 95, 100, even 110% of value and there is no profit to be had.

[Papa_Complex]

Originally Posted by shmike

I am assuming your parents are retired?

Once upon a time:

Joe & Mary put 20% down. If they made 5 years worth of payments and then defaulted, the bank would take back the home (that was probably worth as much as the sale price, maybe more). Since the bank had 20%+ equity in the acquired home, they would sell it and make money.

That is a very tough scenario to replicate in a down market, let alone a free-falling market. Add in the fact that many houses in the last few years were financed at 95, 100, even 110% of value and there is no profit to be had.

Retired? Yes and while this is the worst downturn in recent memory, you have to remember that this isn't the first time that housing prices have tanked. Banks made out like robber barons then, and have again. If Freddie Mac and Fannie May had been allowed to fail, then that would be one thing. Because they weren't, this situation isn't fundamentally different from previous ones.

[shmike]

Originally Posted by Papa_Complex

Retired? Yes and while this is the worst downturn in recent memory, you have to remember that this isn't the first time that housing prices have tanked. Banks made out like robber barons then, and have again. If Freddie Mac and Fannie May had been allowed to fail, then that would be one thing. Because they weren't, this situation isn't fundamentally different from previous ones.

This is the first time since the Great Depression that housing prices have TANKED.

There have been dips before but nothing of this magnitude. Not even close. (I have charts if you'd like)

The article you posted earlier said that Fannie and Freddie back about 1/2 of the loans out there. Are we not going to count the other half?

[Captain Morgan]

Originally Posted by Papa_Complex

Retired? Yes and while this is the worst downturn in recent memory, you have to remember that this isn't the first time that housing prices have tanked. Banks made out like robber barons then, and have again. If Freddie Mac and Fannie May had been allowed to fail, then that would be one thing. Because they weren't, this situation isn't fundamentally different from previous ones.

But it IS different in the fact that homes used to only be financed with 20% down. It wasn't very common for homes to be completely financed, or even over-financed like it is today, which is why banks made out like robber barons back then.

[Homeslice]

Which puts more discredit on the idea that this was some master plan, because if the banks suspected that the market could tank, they'd have required bigger downpayments.

[shmike]

Originally Posted by Homeslice

Which puts more discredit on the idea that this was some master plan, because if the banks suspected that the market could tank, they'd have required bigger downpayments.

I agree.

The banks rode the wave up just like everyone else.

They then wised up earlier than the general population and started shorting their own products and that's where things get really messy.

[Particle Man]

Originally Posted by Captain Morgan

But it IS different in the fact that homes used to only be financed with 20% down. It wasn't very common for homes to be completely financed, or even over-financed like it is today, which is why banks made out like robber barons back then.

See that totally floored me. I wouldn't have even imagined TRYING to buy a house without at least 20% down (preferably more)

[tommymac]

Originally Posted by Particle Man

See that totally floored me. I wouldn't have even imagined TRYING to buy a house without at least 20% down (preferably more)

Same here, but my thoughts were on not paying PMI, was like throwing money away IMO

[Particle Man]

Originally Posted by tommymac

Same here, but my thoughts were on not paying PMI, was like throwing money away IMO

Exactly - it wasn't from any sense of fiscal responsibility - I'm just a cheap bastard

[tommymac]

Originally Posted by Particle Man

Exactly - it wasn't from any sense of fiscal responsibility - I'm just a cheap bastard

I fit that description too. its funny I thought we skirted the bottom when we bough tour house. Now values are still dropping and the mortgage rates are a quarter percent lower too.