Builders Make Timely Payments, and Banks Still Foreclose

I think banks and corporations are running scared that people won't be able to pay the mortgages, construction loans, etc and are letting this fear get in the way of common sense.

Nicole - What an unfortunate story.  I think a lot of the banks/lenders out there are going to continue to do some pretty odd things.  You're absolutely right that this doesn't make much sense.  The problem lies in the fact that the banks are scared.  Fear breeds odd behavior in anyone.  Sure Brown might have trouble down the line and he's a risk, but there is the chance he might not.  In order to minimize that risk and kill off that fear, the banks killed the situation now instead of waiting to see how it panned out.  I actually think the large numbers for foreclosure rates are being pushed higher by this same type of fear.  The consumer hears nothing but foreclosure, foreclosure, foreclosure.  When they get behind for one second, they think "I'm heading for foreclosure."  They walk right into it without thinking of the solution, the work around, or the plan to get them back on track.  I am not saying this to minimize the problem or the problems that people have faced, there is a problem and there are many people suffering, but I do think that many people allowed themselves to move to foreclosure, because they didn't know of anything else, because of all the badgering by the constant news on the subject.  As for the banks, they know that now is a time when the foreclosure rate can help them (my theory is a bit twisted, but hear me out).  They can take the bad debt onto their books and between resale and tax strategies, turn it to their advantage.  As well, it allows them to stand in line before Congress and cry poor and to ask for help.  The current idea that we can't allow banks to fail is one that I only half subscribe to, sure I don't want the banking system that we all rely on to fail, but should we in return let the lending institutions hold us hostage?  With all the bad debt they now carry, they look like poor penniless waifs on the streets and they (hope) want us to feel pity on them.  That pity can quickly return to the feeling that "the banks aren't so bad...let's stop berating them and give them another chance."  That pity is what I truly think they're hoping for.  "We lost so much money, we were only trying to help."

I apologize that my comment is jumping around a bit, but when I read the story, my head began to swirl with ideas and thoughts.  Sometimes I have trouble getting them all out in one straight line comment.