We all know owner's of homes that are waaayyy under water....owing much more than the home is worth today. This is not due to the fact that they pulled equity from the home when they probably shouldn't have, or because they financed 100% or more when they purchased....their only crime was buying at the height of the market.
I'm starting to have a hard time coming up with reason's in my own head (besides moral) of why these type of owners shouldn't bail on their homes. In some areas, they is seemingly no way their home will ever be the value they owe on their home. We've all heard or read that business's don't hold onto assets that perform poorly. Well, why should a homeowner?
This obviously has hit home with many, as we are seeing "Strategic Defaults" and owner's just walking away while showing no real signs of distress.
My question is, why don't the banks deal with this segment of the market. Why not refinance these homes at 100%, 105%, 110%....whatever!.....of the market value of the home today and at the owner's current interest rate...which is probably higher than what the rates are today....and write off the balance? I believe many owners would take this deal all day long and we would be left with a little more stability in neighborhoods and the market place. The banks could set criteria such as not having any late pays, proving job stability, etc. etc.
Instead, I am still seeing loans done with 3.5% down, lower credit (600 score) and what a would consider more risky (even though they are insured) loans. Why not start helping out the common owner that wants to stay in their home and can afford it, but can't see why they should pay $100K more for an asset that will never be worth that again......
I understand the secondary market and the loss implications on the bank side...but if our government can come up with programs like HAFA and the like, that are proving modest if best results, why can't they help out the good guys?
Just a thought.