how do forclosures impact the banks?

[newyorklady]

sorry for being such an idiot, but was thinking with the impending real estate crisis, how would this affect the lenders? if people default on their mortgages what is the impact on the banks? would this be good for them bc then they can repossess?

[cute fuzzy bunny]

Depends on the market and how much they're in the house for. If they've been requiring 10-20% down and the home is in an upmarket, the bank might do okay on a repossess/resale.

If its the way things actually ARE in most markets now, they're eating a 100% financed house in a down market.

Very, very bad for the lenders.

Happening right now with the people who bought my wifes old house. Got 100% down on a variable rate interest-only mortgage, made about six payments and that was it.

Bank financed the 240k, they might get 180-200 tops for the house, and it'll take a long time to sell.

[newyorklady]

thanks. makes sense.