The housing problems have caused bank failures. We as tax payers are lending over $1 trillion to financial institutions to bail out a constipated credit system due to non-functioning mortgages.
Somewhere in the southwest U.S. there was an auction yesterday for foreclosed properties. One lady had lost her home which had been for sale for $149,000. It hadn't sold and the bank put it into the auction market. The lady came to the auction for sentimental reasons. She had lost her home and cried during the auction. A concerned potential buyer was distressed by the lady's story and bought her previous home for $31,000. The lady was told she can now buy back her home with a new mortgage (based on $31,000). She moves back into her home next week.
My question is why the bank that held the mortgage couldn't work out a reasonable arrangement with the lady? The bank is accepting $31,000 for a property that once had a value of $149,000. By my calculations that is a loss of $118,000. You'd think that instead of taking the $118,000 loss, there would be lots and lots of good solutions. It would mean that the bank would have to show compassion. Now that would be different?
But the lady who lost her home gets the last laugh. She gets to buy her $149,000 a second time for only $31,000. She will get an unbelievable low mortgage for the reduced sale value. If she is smart, she will never deal with the her local friendly bank again.
Of course the loser is the taxpayer. We keep the bank functioning, they are allowed to pay incentives for everyone in the bank that originates new loans and we get to pay higher taxes. Is this a great county or what?
My hat is off the the good sumaritan that purchased the foreclosed property for $31,000 and is making it available to the previous homeowner. There are good caring people in the world.
Love,
Dad