Rent vs Buy in Yorba Linda>Question Details

Ideashare, Other/Just Looking in San Marcos, CA

Why don't banks just become part owners of homes? It's got to be a better solution than foreclosing; there are fewer buyers due to high

Asked by Ideashare, San Marcos, CA Mon Oct 18, 2010

unemployment.

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We're all waiting to see how the big banks handle the foreclosure freeze and what their next steps will be.
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.
1 vote Thank Flag Link Mon Oct 18, 2010
For better or worse banks must look at their bottom line and how to obtain the most return from an asset that they can. Time of course plays in to this equation. If obtaining returns could be measured over limitless time their would be more probability of creative solutions to difficult problems.

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.
2 votes Thank Flag Link Thu Apr 14, 2011
Banks are in the lending business they don't want to be in the real estate business or become property managers. They are looking to cut their losses as soon as they can and move on to an investment they can make money on.
2 votes Thank Flag Link Mon Oct 18, 2010
Why don't banks just re-negotiate or re-structure their mortgages? If done correctly it would be a win-win situation for all parties. And it's not that difficult. The bank would still have someone paying a mortgage, the bank would not have a vacant home to now try and sell, and overall this would save the lender (bank) a huge amount in costs. There are programs out there for homeowners to try to re-negotiate mortgages, but the banks don't want to have anything to do with them. Banks, and several times the media, have made the distressed homeowner the bad guy.
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.
0 votes Thank Flag Link Fri Jul 8, 2011
Ideashare...A creative solution to this mess is about to launch in Newport Beach. Their web sites are PeoplesAlly.org and InvestorsAlly.com. They have a solution where up to 9 investors are paired up with a homebuyer, form a LLC to buy a home with cash while sharing the risks and rewards of their LLC. The homebuyer must live in the property, have some money in the LLC, and pay market rent to the LLC which each member recieves per their shares owned in the LLC. The same distribution is applied when selling the property. NO BANKS INVOVLED! This is called Flexible and Reversible Joint Home Ownership...FARJHO. Mitch Frisch Realtor 949 292 9944
Web Reference: http://peoplesally.org/
0 votes Thank Flag Link Sun Jun 19, 2011
I meant to add that Robert Bruno's answer was well reasoned and explained too.
0 votes Thank Flag Link Thu Apr 14, 2011
I am pretty certain a bank's charter does not allow it to own real estate. It is not what it was created to do.
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.
0 votes Thank Flag Link Mon Apr 11, 2011
Ideashare,

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.

Karen
0 votes Thank Flag Link Mon Apr 11, 2011
Ideashare,
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!
0 votes Thank Flag Link Sat Oct 30, 2010
I still think that flooding the market with more real estate, that's been sitting and rotting and neglected while there is such high unemployment is a bad idea even for the banks. Better for them to look at short term losses or delay of return on investments than total losses. But then again, a lot of people do risky things with their money just because other people are doing it.

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?"
0 votes Thank Flag Link Thu Oct 28, 2010
How will that help any, if you dont pay the banks no matter if they are part owner or not, they wont have you living there for free, they want money foreclosure give them money and plus why be part owner when they can fully own your home in foreclosure.
0 votes Thank Flag Link Mon Oct 18, 2010
I dont think banks want to get into the real estate business...just the "I am gonna take your money business"
0 votes Thank Flag Link Mon Oct 18, 2010
Why on earth would I want to be partners with a criminal? Why would any homeowner want to be partners with a disgusting criminal that deserves to be in jail for the next 10-20 years?
0 votes Thank Flag Link Mon Oct 18, 2010
Banks "creative solutions" got us into this mess. There's no easy answer. Dragging out the problem has made it worse.
0 votes Thank Flag Link Mon Oct 18, 2010
Joseph, the problem is they are not getting these properties off their books, and the properties are being devalued due to damages (intentional and due to neglect), and abandonment.
0 votes Thank Flag Link Mon Oct 18, 2010
Michelle this sounds like a "pat" answer "Banks are in the lending business".

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.
0 votes Thank Flag Link Mon Oct 18, 2010
Well, so what if they can lend when few who would like to buy can't qualify for loans. Who would put their savings down to buy in this market. Banks need to come up with creative solutions!
0 votes Thank Flag Link Mon Oct 18, 2010
Michelle is right. And to add to that the sooner the Banks get the properties of their balance sheets the faster and more money they'll have to lend out.
0 votes Thank Flag Link Mon Oct 18, 2010
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