I'll point out my own solution: Reduce EVERY balance on an existing mortgage on the books by 30%. Those who abandoned their homes should not have the right to recapture them. Those who stayed to attempt to mitigate the loan should. We have all been impacted by the market conditions - every region in the country. The 'solution' should benefit everybody and stop the cycle. And, it would be an immediate fix, rather than handling each home on a case-by-case basis and dragging this out over the next ?? years. Stepping off my soap box now. Thanks.
It reminds me of how a football coach manages the clock towards the end of the game. We all assume they know what they are doing (and many actually do) but from time to time they clearly "mess up". Banks, of course, as large and cumbersome as their structures often are prone to "mess up". Given the scale and complexity of the problem combined with the layers and layers of regulations involved it is not a simple issue easily resolved.
I work with many Seller Financed properties where only one seller opted to take a property back as a Deed in Lieu of Foreclosure. All the others have worked out alternative financing arrangements with their buyers. All the note holders will still be paid full face value of the note, it may just be delayed a few years. Or have rolled the discounted amount on to the back end of the note to be paid when the economy gets back on it's feet again.
Banks do not want to own real estate because they can't legally own it, just foreclose on it and liquidate the temporary holdings through sheriffs sales. Unfortunately, this recession has gotten so massive, that properties are not being sold at these sales. The real estate is an asset and is held in receivership by the lender, not really owning it, but still responsible for it. That is why they set up REO's, short sales and a network of brokers to dispose of these assets in all the various stages of receivership. In short, it is a mess, and they are working through it the best they can.
Certainly many consumers have great ideas! But that's another subject.
If you think about it, the banks are already the owners of the homes, they do not need to share equity with the borrowers since there is no equity....normally. This would just delay the inevitable.
Great question. It will be necessary to find creative solutions should B of A and Wells Fargo chose to survive.
The current put-backs B of A and Wells are being charged by the large investors (ie; Blackrock, the Federal Reserve Bank of New York,Pension funds, etc) along with the lawsuits pending by 50 states attorney generals could very well force them both into recievership.
Currently, the banks in many cases don't have the ability to "become part owners" because they are only "servicing" the foreclosure for the "TRUST" that (maybe, depending on what the courts decide) holds the mortgage----- they are doing this on behalf of the owners of the tranched mortgaged -backed securities and the guarantors of the securities.
Hah! Scott's right---kind of sounds like an episode of WHITE COLLAR!
It will take all of us thinking together to come up with creative solutions to slove this mess.
You might want to check out my blog for more specific info. Cheers!
Remember what mom said, "Well, just because your friends do something is not a good enough reason to do it also. If your friend jumps off a bridge are you going to jump too?"
Think about it, were they just trying to lend or was this an investment with expectation of profits?
Continuing to be a follower and going through the motions is not going to solve the problems here. Banks should be looking out for those investments by looking at this problem from a wide angle. Perhaps the resulting answer(s) will actually help themselves and their customers and investors.