The lender should certainly try to collect. But a fairly large percentage of these loans are going to be uncollectable. If a person with no savings owes $300k on a $250k house, and they lose their job, the bank is going to lose money, no matter how hard they try to collect. This is where the phrase "can't get blood from a stone" came from.
A smart bank realizes that they have made a mistake, and accepts a short sale and the moderate loss it intails. A dumb bank insists on full payment, and discovers in January that the borrower has left town and left them an empty house with frozen pipes and a flooded basement.
Part of being a smart bank is not making loans that put you in this position. If you make your borrowers put 20% down, its pretty rare to lose money on a home loan. That is why they've made people do that for decades.
 Quote:
Originally Posted by youbet
Not quite sure what you're trying to say Hamlet.......
Are you saying that borrowers should be let off the hook gently (no collection agencies, no selling the BMW they purchased with the HELOC money, etc.) and that lenders should eat the losses without trying to collect?
|
|