Retire Soon
Full time employment: Posting here.
- Joined
- Nov 23, 2005
- Messages
- 655
BofA is afraid that it's different this time:
Calculated Risk: BofA: Attitudes Changing Towards Default
There's been a change in social attitudes toward default
I think there is a lot of merit to this article. Yesterday, I went to get a haircut. Probably because subprime loans have been on my mind lately, the subject of our conversation turned to mortgages. Well, the barber mentioned that he'd refinanced his home some time back. He seemed to be upset with his lender because they did the appraisal by computer and never physically inspected his house. It turns out that they are now upside down on their first mortgage to the tune of $112,000 (based on what they now think their home is worth). He seemed to be very upset with the lender as he accused them of inflating the value of his appraisal. He said the home was very much in need of repair. In other words, it was their fault. There are probably hundreds of thousands of mortgage holders that now hold contempt for their mortgage lender because of similar circumstances. What will happen if many of these people do indeed walk away from their homes? By the way, this article says that home values could drop as much as 30%. Keep in mind that if home values dropped by that amount that it would take nearly a 43% increase in value to return to the original market price. If lenders tighten up loan qualifications more than they already have and interest rates rise due to current inflation, how long do you think that will take?