Ultimately, nothing – nothing the banks can do will actually help the in trouble homeowner. The banks can’t drop the rates to teaser levels (that would be as bad as the ‘investors’ who are losing money each month renting out their properties at below carrying costs), interest rates are too high.
Most everyone in trouble, isn’t in trouble because they have an extra 100-300 payment. They are in trouble because they cannot reasonably pay back any amount that would come close to the dollars they were funded to buy their home. In a world of sinking home values, they have even less reason to stick around.
I think that by propping up the homeowners in default, will only lengthen the time that housing is in the dumps. On the other hand there isn’t really much they can do to fix it anyway.
The defaults are going to happen, people are better off pulling the plug now, before they rack up huge debts trying to service their liar loan estates.
Everyone I know who bought an investment property are trying to rent them. They would rather lose 1-3K per month renting than try to sell at a substantial loss. I don’t blame them, I think it will just keep housing down in the dumps.
As prices slowly sink, more and more of them will sell for whatever they can get. There are still deals out there, there hasn’t been a baseline of price declines yet. When the general public sees how long it is going south, and they are trying to service that debt, they will try to sell out.
