Banks will be overwhealmed with the amount of foreclosures and lose trillions, should they renegotia

The crisis that lenders are going though is only going to get worse. If the hold fast and do not work with people because they feel that it is the borrows fault, so therefore it is their loss and take their homes, then the real loosers are the banks and the american taxpayers. If the lenders work with the borrowers and renegotiate their loans to a better rate and or payment... then the banks, the borrowers, and the american tax payers win. The loans that the banks have on the borrowers home is likely twice the amount that the lender will be able to sell the property for, if by the grace of god, they can sell it. They will likely be stuck with it for a long time, not receiving mortgage payments or anything but paying money out to sell the property. Everyone wins if the lenders work with home owners that are in default to save their homes by granting concessions, however, if they dont, then the homeowner walks away and can buy that same home for half of what they owed, and the bank loses

Banks will be overwhealmed with the amount of foreclosures and lose trillions, should they renegotiate loans?heart rate

As the other poster said, the owner of the security has to agree to changing the terms. They bought the security thinking they would get paid, say 8% and now the buyer only wants to pay 6% and/or take longer to pay. The bankers who made the loans no longer own them.

If the loans are written down (say $200,000 to $150,000), the buyer will have $50,000 of taxable income which under current tax law *is* income to them. (Bush promised to rewrite the insolvency law, but never did.) The security holder would end up with a $50,000 capital loss which they can only claim $3000 a year against other income.

And lastly, the homeowner who walks away cannot buy back their own home on the courthouse steps (it%26#039;s not allowed) and no one is going to loan enough money to buy another house anyway if a foreclosure is on their credit history.

Banks will be overwhealmed with the amount of foreclosures and lose trillions, should they renegotiate loans?

loan

Lenders know they will lose money on foreclosures (they already are). Part of the complication here is that so many of the %26quot;subprime%26quot; loans have been packaged into debt securities and sold to investors (often the big investment banks).|||They will make decisions based on what they feel is best for them in each individual case. Certainly they are going to take a bath and will do what they can to minimize it.|||In some cases, it would make sense to rewrite the loans if the borrower would be able to make payments and keep the house, with a fixed rate loan at current rates.

However, for those who went in way over their head (even those who were inappropriately encouraged to do so), it is hopeless. They just have to walk away and start over again.