Is this idea stupid?

[Garbage Man]

Ok, be honest I just had this thought and I haven't fully thought it through. Is this a dumb idea or not?

I am watching the news and seeing the economy is going to hell and its all centered around the real estate over valuation and the usual stuff is clearly not working. So an idea hits me.

Right now we have all these vacant foreclosed homes that nobody can buy because nobody can get qualified to buy them because all the potential buyers out there have been foreclosed on so their credit is trashed. Vicious cycle.

So why not have these banks that are holding onto all these homes at all levels get with the home owners and say "Ok how much home can you really afford?" Then when you get the guy who is living in a $550,000 home but he can only afford a $350,000 home why not say "Ok we happen to have some foreclosed homes that are worth $350,000. lets move you into that one. " Now we have a guy in a home he can afford and we are getting payments on that home and we now own the $550,000 home that we can get the guy who is living in the $750,000 to move into." That will get a lot of these empty homes filled and start getting $$$ back in the pocket of the banks. I mean the banks will wind up with vacant million dollar homes but there are fewer of them and they actually have a better rate of sale.

[nr5667]

The problem is, the guy's home may have been worth 550,000 when he bought it, but it's now worth 350,000 dollars. So why not just let him stay in the same home?

The bank lost money, it's not getting that money back -- the money disappeared. The bank now has a guy who has defaulted on a 550,000 dollar loan for a house that's now worth 350,000 dollars.

About 50% of the people who got sub-prime loans lied about their income, figuring they were just going to flip the house before the interest rate jacked up, so there's no guarantee they can afford much of anything...

The bank is going to sell these homes, there's no question about it -- the problem is the homes aren't worth what the loans were.

[LA DEP]

so maybe we should go back and see where the profit went from the overprices homes, get it back from the greedy bastards and start off from the beginning?

How about we go back and start really looking at the knuckleheads that approved loans for people that had ZERO business even applying for a home loan at that time in their lives?

Or, even better, go back and look at the knucklehead (cough...Clinton...cough) that forced through a law that FORCED many of the lenders to loan money to those that couldnt normally qualify for said loans, because it was all part of his social engineering scam?

[(S)Sgt Elmer]

The problem is, the guy's home may have been worth 550,000 when he bought it, but it's now worth 350,000 dollars. So why not just let him stay in the same home?

The bank lost money, it's not getting that money back -- the money disappeared. The bank now has a guy who has defaulted on a 550,000 dollar loan for a house that's now worth 350,000 dollars.

About 50% of the people who got sub-prime loans lied about their income, figuring they were just going to flip the house before the interest rate jacked up, so there's no guarantee they can afford much of anything...

The bank is going to sell these homes, there's no question about it -- the problem is the homes aren't worth what the loans were.

Correct. Along with what LA DEP's talking about (good post) the additional problem is real estate in general was VERY overvalued. So the banks can't reasonably expect to recoup money that was really never there in the first place.

[Garbage Man]

My thinking was that even f the guy could afford a 350 and thats what his house was worth he would still have to give that home to the bank and then "buy" another 350 home. That way the bank made some profit. They sell the house and get the other house. I realize that the banks are the idiots who put themselves in this mess but everyone has invested in them including our pension plans so we need them solvent.

I would love to see some consequences to the indiciduals who ran them and got them in this mess but we al know those guys are gone with their golden parachutes living large on their Swiss bank accounts.