hm, i think that's a different issue. i'm wouldn't be surprised if on average, loans that go into foreclosure wind up losing money for the bank.
but here we're not talking about the loan as a whole. here's a bad loan, the bank has already decided it's a loss, the question is not "are we going to get our $100,000 back plus interest?" the question is "are we going to get any money at all? and how do we maximize the pittance that we do get?"
it sounds like you're saying that, at least if only there were some way to keep pressure on the homeowner to continue making payments as best they can, that would always produce more money than foreclosing. and i'm saying that, if that were true in the general case, the rational bank would never foreclose; it would always opt for the "figure out how to keep pressure on the homeowner while keeping the loan from defaulting" method. because (you say) that would yield more money.
perhaps you mean that there are some special market conditions that make that true right now, which do not generally hold? or, perhaps, that the government is uniquely positioned to keep pressure on the homeowners to make payments despite separately arranging for the loans not to default?
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momijizukamori
no subject
Date: 2008-09-23 16:09 (UTC)hm, i think that's a different issue. i'm wouldn't be surprised if on average, loans that go into foreclosure wind up losing money for the bank.
but here we're not talking about the loan as a whole. here's a bad loan, the bank has already decided it's a loss, the question is not "are we going to get our $100,000 back plus interest?" the question is "are we going to get any money at all? and how do we maximize the pittance that we do get?"
it sounds like you're saying that, at least if only there were some way to keep pressure on the homeowner to continue making payments as best they can, that would always produce more money than foreclosing. and i'm saying that, if that were true in the general case, the rational bank would never foreclose; it would always opt for the "figure out how to keep pressure on the homeowner while keeping the loan from defaulting" method. because (you say) that would yield more money.
perhaps you mean that there are some special market conditions that make that true right now, which do not generally hold? or, perhaps, that the government is uniquely positioned to keep pressure on the homeowners to make payments despite separately arranging for the loans not to default?