When mortgages became politicized into tools of social engineering, the fundamentals flew out the window. There’s no good reason to pile debt upon debt when you’re already in financial distress, it’s not a way out it just delays the day of reckoning. Too-easy financing has led to boom and bust cycles, which are bad. People were encouraged to buy more than they could logically expect to be able to repay under the best of circumstances, which is also bad. Why do the bean-counters think that this is a good thing?
Banks keep houses like this on their books at “book” value, because other wise it show up as a loss. It’s how these people can live for free.
A good friend of mine made $85,000 a year. Owned several homes, two of which he bought with his parents and were rentals. His parents passed and he inherited their share of the properties. He kept pulling money out of the equity and spending it. I tried repeatedly to give him financial advice about paying down his debts, which he ignored.
One time he refinanced to obtain money to pay off his maxed out credit cards, and he told me the loan officer offered him $80,000 cash on top of what he needed to pay off the credit cards. I asked him "You refused, right?". He said "No, I took the cash - they were giving it to me!". I told him he was a fool, he had no business taking more as it would sink him further into debt.
Things got worse, and the financial stress of the debt load contributed to the fatal heart attack that killed him a couple years ago. His debt load exceeded his worth. At the end, he was several months behind in all his mortgage payments. Waving a loan in front of some people is like offering free candy to children. Sad, but they can't resist.