Wednesday, February 24, 2010

Mortgage Crisis

This is the report that came out yesterday, in addition to a further drop in residential property prices.
In such a situation, what could a home 'owner' do? The stupid answer is to say - he will let the bank foreclose on the property; no point paying money when house prices have fallen so much.
The plausible answer could be: "Hey, I took a mortgage of $100, my home is worth $95 now; let's negotiate such that my mortgage value is written down to $95. "

I say this because banks would not want to foreclose on property in a depressed market and homeowners would not want to vacate homes. Of course, most people will keep paying money, but some might just come up with this negotiation.

Also, I know VERY little about this market - so my comments can be considered naive.

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