One more thing..in regards to what Paul said for the short sale..some banks who are doing the short sales are sticking it to the borrowers..yes they can have the debt forgiven by the IRS..HOWEVER…some lenders are seeking a dificency judgement which can I understand stays on your credit for 10 years..showing that you OWE the extra money between the short sale and the actual mortgage balance…

Makes you wonder what kind of loan programs are going to be marketed to the millions of foreclosure victims out their in the next 2-3 years….(you know that the lenders are going to go after this crowd simply for the fact they will be able to charge them a pretty penny for the interest rate.)

Not only that, but as the value of the bank’s holdings drops, the capital requirements increase and they run out of money. Yikes……

Tom

The loss situation for the banks is in the valuation of these loans…as the market continues to show declining prices and loans of 100% percent financing losing 20% or more imagine being the bank that has a property with a mortgage of $900K and a current true market value of $600K..Now multiply that 300K plus or minus loss by hundreds, or thousands of homes..and the value continues to slide…example in a community near me you have a home listed at 1.5Million with a mortgage of around that dollar amount…now you have a home comparable around the corner as a short sale for $725K(chances are it may go into foreclosure and sell for even less)…not good…chances are also high that 1.5M home will fall into the same situation as the $725K home..how would you like to be that bank!

Each month as the values and foreclosures happen the banks have to report it on their balance sheet which gets reported to Wall Street…you get the picture…now imagine the investor,Wall Street, local city, 401K, hedge fund, and so on… who are sitting on the sidelines watching their portfolio decline by 20%, 40%, 50% or more(thinking they had invested in AAA rated funds. Low risk)…kind of a revisit to the dot com days…

When ordering an appraisal I never tell the appraiser what value I am looking for, I just say run some comps and let me know where it stands. I am sure i’ve lost a few deals doing this but I would rather have a true appraisal then a stretched appraisal.

I have a couple of questions…..If I buy a home with a purchase value of 900k and a loan of 855k (95ltv) and can longer make the payments and get foreclosed on. The bank now gets to write down 855k loss. What happen when the bank sells my home for say even 700k ….do they have to report that money??? Are the bank write-off numbers real???? Who is checking the loans that are being written off?Are they just padding the number? Is this a way for the banks to take advantage???
If my mortgage was 855k and the bank sold it for 700k the write off is really 150k plus cost?????

Also I read that the foreclosure rate was .625…that is only a little more than 1/2 of 1%…that is 1.2 out of every 200 loans……to me that is not that bad.. I am missing something here????? If 198/199 people are paying there mortgage..how are the banks losing so much money???????? Where has all the money gone???

“After the mortgage industry is nationalized, which we could be fast headed, some of us will be working for the government in a mortgage industry capacity.

Here is a good read on such a scenario being possible, by Dr. Nouriel Roubini, http://www.rgemonitor.com/blog/roubini/246724. From the article…

In a financial crisis the entire capital of the banking system is often wiped out and, ever after shareholders have lost all of their equity, the value of the assets of the banks is below the value of their liabilities (deposits and other insured debts). Thus, a fiscal bailout and recapitalization of the banking system requires an effective nationalization ? until banks are cleaned up, recapped and sold back to the private sector ? of the banking system. So in this $1 trillion (7% of GDP) fiscal bailout scenario, you would get an effective nationalization of a good part of the US banking and financial system.”

His site is subscription based, however there is a free trial period. Dr. Roubini’s views are extremely bearish and he backs up his position extremely well.

Another good read of his on the current crisis in general, can be found on The Common Sense Forecaster blog. CSF has a post devoted to contemplating Dr. Roubini’s “The 12 Step Program to a Financial Crisis”. Here is link, http://commonsenseforecaster.blogspot.com/2008/02/this-weekends-contemplation-12-step.html.
It’s a long and very sobering read best digested well before bedtime.

What is really frightening is what happens when the government becomes involved in a crisis. I give you NOLA after Hurricane Katrina as proof of that statement.

Check out http://calculatedrisk.blogspot.com/2008/02/feds-poole-gses-too-big-to-fail.html