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sandiego
Participant“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”
You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.
In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).
Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.
Early 2008, some deals start happening in the high $300’s.
What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?
Participant“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”
You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.
In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).
Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.
Early 2008, some deals start happening in the high $300’s.
What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?
Participant“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”
You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.
In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).
Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.
Early 2008, some deals start happening in the high $300’s.
What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?
Participant“A lender has every right to refuse to lend $400,000 on a $500,000 property because they feel the underlying value is really $350,000. They don’t have to follow the ‘crowd’.”
You didn’t understand that example at all. Let’s say it is early 2004. A builder offers 12 homes for sale in Phase 5 of a 7 Phase tract. All of the homes in this phase sell for $495,000- $505,000. The GOOD CREDIT ONLY BANK makes a loan to a Borrower with an 800 credit score and a $100,000 down payment. Any appraiser would have no issue saying that these homes are worth $495,000 to $505,000 because they have 11 comparible sales on the same street.
In late 2005 Countrywide starts sending out their mailers stating that it is a great time to refinance at a lower rate and take out some some equity. 5 of the homeowners on the street take advantage of the offer. The appraisers are convinced to value these homes at a 15% increased value ($75,000).
Mid 2006, some NOD’s start appearing and by early 2007, there are 4 foreclosures. Countrywide (and other banks in the tract) now “battle” for any remaining buyers and dump prices.
Early 2008, some deals start happening in the high $300’s.
What is your $500,000 home (with your 800 credit score and 20% down payment) worth now? What is the value of the collateral for GOOD CREDIT ONLY BANK?
ParticipantActually, if a property is foreclosed on and someone buys it on the Courthouse steps for more than is owed on the loans (plus costs to collect), the homeowner would get the difference. Lenders are not allowed to profit from foreclosures.
If no one bids on it at the Courthouse steps and the foreclosure is perfected, the house can be put on the market with a clean title. If it sells for more at this point, the lender would get all of the proceeds.
ParticipantActually, if a property is foreclosed on and someone buys it on the Courthouse steps for more than is owed on the loans (plus costs to collect), the homeowner would get the difference. Lenders are not allowed to profit from foreclosures.
If no one bids on it at the Courthouse steps and the foreclosure is perfected, the house can be put on the market with a clean title. If it sells for more at this point, the lender would get all of the proceeds.
ParticipantActually, if a property is foreclosed on and someone buys it on the Courthouse steps for more than is owed on the loans (plus costs to collect), the homeowner would get the difference. Lenders are not allowed to profit from foreclosures.
If no one bids on it at the Courthouse steps and the foreclosure is perfected, the house can be put on the market with a clean title. If it sells for more at this point, the lender would get all of the proceeds.
ParticipantActually, if a property is foreclosed on and someone buys it on the Courthouse steps for more than is owed on the loans (plus costs to collect), the homeowner would get the difference. Lenders are not allowed to profit from foreclosures.
If no one bids on it at the Courthouse steps and the foreclosure is perfected, the house can be put on the market with a clean title. If it sells for more at this point, the lender would get all of the proceeds.
ParticipantActually, if a property is foreclosed on and someone buys it on the Courthouse steps for more than is owed on the loans (plus costs to collect), the homeowner would get the difference. Lenders are not allowed to profit from foreclosures.
If no one bids on it at the Courthouse steps and the foreclosure is perfected, the house can be put on the market with a clean title. If it sells for more at this point, the lender would get all of the proceeds.
ParticipantYou are all missing the point; even if you kept your nose clean and only made loans to people with 800 credit scores with 20% down, the underlying value of the assets that you lent on have been severely affected by your competitors.
As a bank, you may think that the $400,000 that you lent on a $500,000 home is still safe until Countrywide forforecloses (because they lent 125% of the appraised value) on the house next door and puts it back on the market for $350,000. In fact, as the lender, you may be required by the loan provisions that your Loan to Value doesn’t exceed 90%. By law, you may have to go back and tell the homeowner that they need to put another $85,000 down payment to get the loan in conformance.
ParticipantYou are all missing the point; even if you kept your nose clean and only made loans to people with 800 credit scores with 20% down, the underlying value of the assets that you lent on have been severely affected by your competitors.
As a bank, you may think that the $400,000 that you lent on a $500,000 home is still safe until Countrywide forforecloses (because they lent 125% of the appraised value) on the house next door and puts it back on the market for $350,000. In fact, as the lender, you may be required by the loan provisions that your Loan to Value doesn’t exceed 90%. By law, you may have to go back and tell the homeowner that they need to put another $85,000 down payment to get the loan in conformance.
ParticipantYou are all missing the point; even if you kept your nose clean and only made loans to people with 800 credit scores with 20% down, the underlying value of the assets that you lent on have been severely affected by your competitors.
As a bank, you may think that the $400,000 that you lent on a $500,000 home is still safe until Countrywide forforecloses (because they lent 125% of the appraised value) on the house next door and puts it back on the market for $350,000. In fact, as the lender, you may be required by the loan provisions that your Loan to Value doesn’t exceed 90%. By law, you may have to go back and tell the homeowner that they need to put another $85,000 down payment to get the loan in conformance.
ParticipantYou are all missing the point; even if you kept your nose clean and only made loans to people with 800 credit scores with 20% down, the underlying value of the assets that you lent on have been severely affected by your competitors.
As a bank, you may think that the $400,000 that you lent on a $500,000 home is still safe until Countrywide forforecloses (because they lent 125% of the appraised value) on the house next door and puts it back on the market for $350,000. In fact, as the lender, you may be required by the loan provisions that your Loan to Value doesn’t exceed 90%. By law, you may have to go back and tell the homeowner that they need to put another $85,000 down payment to get the loan in conformance.
ParticipantYou are all missing the point; even if you kept your nose clean and only made loans to people with 800 credit scores with 20% down, the underlying value of the assets that you lent on have been severely affected by your competitors.
As a bank, you may think that the $400,000 that you lent on a $500,000 home is still safe until Countrywide forforecloses (because they lent 125% of the appraised value) on the house next door and puts it back on the market for $350,000. In fact, as the lender, you may be required by the loan provisions that your Loan to Value doesn’t exceed 90%. By law, you may have to go back and tell the homeowner that they need to put another $85,000 down payment to get the loan in conformance.
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