Which is better (for the lender)-
a. Foreclosure and reposession of a home that will likely be TRASHED by the occupants on their way out. How does the lender then sell this foreclosed home, particularly in a neighborhood where there are a LOT of these foreclosures, and break even? I’m sure the houses sell far lower than the original appraised value and loan amount. One new neighborhood in Atlanta has a lot of foreclosures and the remaining residents are battling trying to keep the grass cut in those yards and local riff-raff keep trying to occupy the houses and turn them into “party and crack houses.”
b. Working with the borrower and changing the terms of the loan. I’m for the lender doing this on their own and NOT government finance or control of this. At best, MAYBE the government could offer tax incentives to lenders who creatively try to work with the borrower. Wouldn’t the lenders come out better by trying to work something out with the borrower, which will allow the borrower to stay in the home?
Yes. All this bail out talk is designed to fix things for Bankers who made bad decisions. They had NO problem pocketing the profits, now they want to shovel the losses onto someone else. What we should be doing is exactly what you said. You bankers, you broke it, you fix it. We suggest you re negotiate the loans, take the loss up front and off your taxes and help these people stay in the homes. If you don't want to do that, foreclose and get in the property management business. What EVER happens, the LAST thing we should be doing in interfering in the Markets. Right now 94% of people are paying their mortgages. This is NOT a crisis anywhere outside some bank's board rooms.
Perhaps if a few lenders and borrowers went bankrupt, a few lessons might be learned.