[quote=SK in CV]Another way to look at this.
No argument, but there still is no immediate give away to the homeowner. He simply reverts to exactly the same place he was when he originally bought the house with no money down. And the lender has less a valuable, but performing loan.
I know many wouldn’t be happy with this kind of false reward to buyers who made bad decisions, but it’s what lenders should have been doing for the last year in cases with qualifieed borrowers, modifying loans to current market value of the collateral, rather than foreclosing and flooding the market with properties, driving values down further.
I know why they don’t do it. But they should.[/quote]
Why? Why should they have? Your statement about ‘driving houses down further’ doesnt hold too much water. By just about any reasonable metric housing prices are either ‘fair’ or ‘over’ priced in the majority of the USA, with the possible exception of Detroit which has been on a downwards sprial for 40-50 years now. In SD they are flying off the shelf. So the argument is that banks should have done mass modifications so that prices could have stayed overpriced and the people who would have benifited the most from increasing prices/leverage can also benifit from decreasing prices/leverage too?
