Comments on: Banks Are Getting Desperate With Principal Reduction Offers http://www.ritholtz.com/blog/2009/11/banks-are-getting-desperate-with-principal-reduction-offers/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Wed, 15 Feb 2012 00:33:57 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: Obe1 http://www.ritholtz.com/blog/2009/11/banks-are-getting-desperate-with-principal-reduction-offers/comment-page-1/#comment-234762 Obe1 Mon, 16 Nov 2009 10:02:00 +0000 http://www.ritholtz.com/blog/?p=43591#comment-234762 No reason for the borrower to agree to this. They are much better off to just walk away, wait a year, and purchase a similar home, or cheaper, with a 40 FHA loan. Yes, FHA will make the loan, they are desperate and are make tons of loans at 3.5% down to people that just went bankrupt on a home 1 year ago. Crazy? yes but the US Treasury is desperate to get money printed and lent out to people. No reason for the borrower to agree to this. They are much better off to just walk away, wait a year, and purchase a similar home, or cheaper, with a 40 FHA loan.

Yes, FHA will make the loan, they are desperate and are make tons of loans at 3.5% down to people that just went bankrupt on a home 1 year ago. Crazy? yes but the US Treasury is desperate to get money printed and lent out to people.

]]> By: The Icelandic Banks Question of The Day http://www.ritholtz.com/blog/2009/11/banks-are-getting-desperate-with-principal-reduction-offers/comment-page-1/#comment-234247 The Icelandic Banks Question of The Day Fri, 13 Nov 2009 10:11:27 +0000 http://www.ritholtz.com/blog/?p=43591#comment-234247 [...] Maybe having to renegotiate with their customers like BoA. [...] [...] Maybe having to renegotiate with their customers like BoA. [...]

]]> By: How the Common Man Sees It http://www.ritholtz.com/blog/2009/11/banks-are-getting-desperate-with-principal-reduction-offers/comment-page-1/#comment-234245 How the Common Man Sees It Fri, 13 Nov 2009 06:44:06 +0000 http://www.ritholtz.com/blog/?p=43591#comment-234245 @ ashpelham2 I believe the debt is a writeoff against future profits for the banks. Considering it was probably created out of thin air there is no real skin in the game for the bank. IOW, due to the nature of fractional reserve banking it's not like the bank actually lost a depositor's money in this deal. I think their main concern is to get that cash flow from the homeowner going again. That way they can plug that money into the magic money multiplier(fractional reserve banking) and get it growing again. @ ashpelham2

I believe the debt is a writeoff against future profits for the banks. Considering it was probably created out of thin air there is no real skin in the game for the bank. IOW, due to the nature of fractional reserve banking it’s not like the bank actually lost a depositor’s money in this deal.

I think their main concern is to get that cash flow from the homeowner going again. That way they can plug that money into the magic money multiplier(fractional reserve banking) and get it growing again.

]]> By: JoWriter http://www.ritholtz.com/blog/2009/11/banks-are-getting-desperate-with-principal-reduction-offers/comment-page-1/#comment-234236 JoWriter Fri, 13 Nov 2009 04:19:06 +0000 http://www.ritholtz.com/blog/?p=43591#comment-234236 Hard to believe. I was under the impression that banks were refusing to modify loans. This offer must not be on a California property. (haven't read CR yet.) Hard to believe. I was under the impression that banks were refusing to modify loans. This offer must not be on a California property. (haven’t read CR yet.)

]]> By: b_thunder555@yahoo.com http://www.ritholtz.com/blog/2009/11/banks-are-getting-desperate-with-principal-reduction-offers/comment-page-1/#comment-234208 b_thunder555@yahoo.com Thu, 12 Nov 2009 23:14:44 +0000 http://www.ritholtz.com/blog/?p=43591#comment-234208 I wish I could get the same deal from my bank! I'm not is default, so I don't think i qualify. on the other hand, if he's not able to pay $1966, I doubt he'll be able to pay $1725. That's only $240/month.. . If I were in his shoes I'd probably either continued "rent" the place for free until eviction, or bargain for even better deal! I wish I could get the same deal from my bank! I’m not is default, so I don’t think i qualify.
on the other hand, if he’s not able to pay $1966, I doubt he’ll be able to pay $1725. That’s only $240/month.. . If I were in his shoes I’d probably either continued “rent” the place for free until eviction, or bargain for even better deal!

]]> By: ashpelham2 http://www.ritholtz.com/blog/2009/11/banks-are-getting-desperate-with-principal-reduction-offers/comment-page-1/#comment-234165 ashpelham2 Thu, 12 Nov 2009 19:59:11 +0000 http://www.ritholtz.com/blog/?p=43591#comment-234165 Man, the homeowner would be stupid to turn that down. In these deals, perhaps someone could explain to me what happens to the principal that is taken off of the balance? Is this debt forgiven? Is it taxable, and how does it effect one's credit? Seems like a relatively new thing, so I wonder what the typical FICO score hit would be? Man, the homeowner would be stupid to turn that down. In these deals, perhaps someone could explain to me what happens to the principal that is taken off of the balance? Is this debt forgiven? Is it taxable, and how does it effect one’s credit? Seems like a relatively new thing, so I wonder what the typical FICO score hit would be?

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