[Sandi Egan]

First I didn’t believe it, but I called my local BofA branch, and they confirmed all the information in OP.

The friendly clerk explained that they are able to borrow unlimited money from the fed at about 2%, so 4.something% is good return.

She also volunteered to explain why are they looking for low credit score/high debt types. The fact is, you have to be unable to pay your full mortgage to qualify for future govt bailout (of course, banks do know what exactly that bailout is going to look like and when does it kick in). And if you don’t qualify for the bailout, the bank will have to assume the risk itself.

Unfortunately, my credit score is too high to qualify for this particular offer. But luckily she found something suitable for me. So now I am pre-approved for 116% LTV loan at 4.78%, as long as the price is above $1.12M. It’s hard to find a home like that anymore, but I’ll do my best.

Too bad Jim the Realtor has sold his Mesa Norte listing already…

[Sandi Egan]

I can help prepare a presentation, that will prove that writing down $18B is actually a good thing.

[Sandi Egan]

I can help prepare a presentation, that will prove that writing down $18B is actually a good thing.

[Sandi Egan]

I can help prepare a presentation, that will prove that writing down $18B is actually a good thing.

[Sandi Egan]

I can help prepare a presentation, that will prove that writing down $18B is actually a good thing.

[Sandi Egan]

I can help prepare a presentation, that will prove that writing down $18B is actually a good thing.

[Sandi Egan]

If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage?

You took $1M loan. Your house now costs 800K. You can’t make payments on $1M. The bank can foreclose on you, spend a lot of money in the process, sell your house and ultimately recover, say, $600K.

Currently popular bailout plan works like this:
The bank rewrites your mortgage agreement, lowering your debt from $1M to 85% of home’s current value, 680K. In exchange government insures your mortgage, meaning that if you default on it again the taxpayers will carry any losses, not the bank.

This way the bank benefits from not having to go through foreclosure process and possibly facing less write downs. The FB benefits, because his enormous loan was just forgiven. Effectively, he bought the house on the peak for $680K, 15% below TODAYS market value. The RE market benefits, because there is one less distressed property on the market. The only people who don’t benefit are the taxpayers, who are exposed to (somewhat lessened) risk of the FB defaulting again, without any prospects for any gain.

[Sandi Egan]

If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage?

You took $1M loan. Your house now costs 800K. You can’t make payments on $1M. The bank can foreclose on you, spend a lot of money in the process, sell your house and ultimately recover, say, $600K.

Currently popular bailout plan works like this:
The bank rewrites your mortgage agreement, lowering your debt from $1M to 85% of home’s current value, 680K. In exchange government insures your mortgage, meaning that if you default on it again the taxpayers will carry any losses, not the bank.

This way the bank benefits from not having to go through foreclosure process and possibly facing less write downs. The FB benefits, because his enormous loan was just forgiven. Effectively, he bought the house on the peak for $680K, 15% below TODAYS market value. The RE market benefits, because there is one less distressed property on the market. The only people who don’t benefit are the taxpayers, who are exposed to (somewhat lessened) risk of the FB defaulting again, without any prospects for any gain.

[Sandi Egan]

If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage?

You took $1M loan. Your house now costs 800K. You can’t make payments on $1M. The bank can foreclose on you, spend a lot of money in the process, sell your house and ultimately recover, say, $600K.

Currently popular bailout plan works like this:
The bank rewrites your mortgage agreement, lowering your debt from $1M to 85% of home’s current value, 680K. In exchange government insures your mortgage, meaning that if you default on it again the taxpayers will carry any losses, not the bank.

This way the bank benefits from not having to go through foreclosure process and possibly facing less write downs. The FB benefits, because his enormous loan was just forgiven. Effectively, he bought the house on the peak for $680K, 15% below TODAYS market value. The RE market benefits, because there is one less distressed property on the market. The only people who don’t benefit are the taxpayers, who are exposed to (somewhat lessened) risk of the FB defaulting again, without any prospects for any gain.

[Sandi Egan]

If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage?

You took $1M loan. Your house now costs 800K. You can’t make payments on $1M. The bank can foreclose on you, spend a lot of money in the process, sell your house and ultimately recover, say, $600K.

Currently popular bailout plan works like this:
The bank rewrites your mortgage agreement, lowering your debt from $1M to 85% of home’s current value, 680K. In exchange government insures your mortgage, meaning that if you default on it again the taxpayers will carry any losses, not the bank.

This way the bank benefits from not having to go through foreclosure process and possibly facing less write downs. The FB benefits, because his enormous loan was just forgiven. Effectively, he bought the house on the peak for $680K, 15% below TODAYS market value. The RE market benefits, because there is one less distressed property on the market. The only people who don’t benefit are the taxpayers, who are exposed to (somewhat lessened) risk of the FB defaulting again, without any prospects for any gain.

[Sandi Egan]

If a person who took out a 1 million $ loan can’t afford it, the fed will pay their mortgage?

You took $1M loan. Your house now costs 800K. You can’t make payments on $1M. The bank can foreclose on you, spend a lot of money in the process, sell your house and ultimately recover, say, $600K.

Currently popular bailout plan works like this:
The bank rewrites your mortgage agreement, lowering your debt from $1M to 85% of home’s current value, 680K. In exchange government insures your mortgage, meaning that if you default on it again the taxpayers will carry any losses, not the bank.

This way the bank benefits from not having to go through foreclosure process and possibly facing less write downs. The FB benefits, because his enormous loan was just forgiven. Effectively, he bought the house on the peak for $680K, 15% below TODAYS market value. The RE market benefits, because there is one less distressed property on the market. The only people who don’t benefit are the taxpayers, who are exposed to (somewhat lessened) risk of the FB defaulting again, without any prospects for any gain.

[Sandi Egan]

Thanks for the link.

[Sandi Egan]

Thanks for the link.

[Sandi Egan]

Thanks for the link.

[Sandi Egan]

Thanks for the link.

[Author]

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