Why are banks, mortgage bond holders, and taxpayers in trouble? - because homeowners can just 'walk away' (Congress, suspect)

[gorgeet]

"In California, lenders are generally barred from getting money from a defaulting borrower. The lender gets the house and that's it, even if the borrower has $1 million in the bank."

"The biggest loser will be mortgage bond investors, and next is originating banks and investment banks (because investors will try to sue for fraud and misrepresentation). Homeowners who put zero or 5 percent down lose little more than outsized hopes of future riches. And as uwalkaway.com notes, eight months of "free rent" will help them feel better."

"Now that Congress has passed higher loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration, Americans will lose because investors facing losses can get paid by Fannie, Freddie and FHA."

Who will pay the mortgage when the homeowner walks? You

[58robbo]

Originally Posted by gorgeet

"In California, lenders are generally barred from getting money from a defaulting borrower. The lender gets the house and that's it, even if the borrower has $1 million in the bank."

"The biggest loser will be mortgage bond investors, and next is originating banks and investment banks (because investors will try to sue for fraud and misrepresentation). Homeowners who put zero or 5 percent down lose little more than outsized hopes of future riches. And as uwalkaway.com notes, eight months of "free rent" will help them feel better."

"Now that Congress has passed higher loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration, Americans will lose because investors facing losses can get paid by Fannie, Freddie and FHA."

Who will pay the mortgage when the homeowner walks? You

perhaps the lender should have thought of that before they dished out 105% mortgages without checking income, asking for a deposit etc

[dunkel25]

Originally Posted by 58robbo

perhaps the lender should have thought of that before they dished out 105% mortgages without checking income, asking for a deposit etc

They did think about it, and avoided it like the plague. Until Congress came along and decided it wasn't fair that poor people don't own homes and started pressuring banks to make risky loans.

[saganista]

Originally Posted by dunkel25

They did think about it, and avoided it like the plague. Until Congress came along and decided it wasn't fair that poor people don't own homes and started pressuring banks to make risky loans.

Pretty gullible to be still in the bag for that line. All loan programs have some underlying delinquency rate, but the exceptional delinquencies that went beyond the normal level of systemic reserves came as a group from the stock of high-cost paper that was pushed into more than just low- and moderate-income communities by the cowboy capitalists at private brokers and all but unregulated bank affiliates to create fodder for the profit-making mbs's and derivatives that investment banks were churning out and dumping into unsuspecting secondary markets. The programs you want to put blame on were concentrated in the 1990's, and the portfolios that were built up then have performed better than industry averages.