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Originally Posted by Zarathustra
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bad paper is bad paper, switching ownership doesn't alter that fact, your timeline of 1 to 2 years would therefore be valid with a free market handling of the issue, and in my opinion more so.Z
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Well remember, each dollar a bank has, can turn into 9 x as much in loans, for a bank to hold a bad mortgage, they have to put money aside in reserve to cover it, which takes away 9 times as much in loan capability, that is why they are willing to dump short sales quick at a 65% loss.
If they sell off these loans to the treasury which pays 35% of what the home is worth, once the market swings back up, it can be sold for double quite easily turning into a profit to cover the original expense.
The money has dried up for buyers to get homes, which is crashing the value of home prices, in San Diego, our Medium has dropped 38% since last year.
Without money banks would have to raise rates so home prices would have to drop even further for them to be affordable in today's market.