harveyc

Disclosure: I had close to a 30 year career in lending, though commercial agriculture lending, not residential.

I get perturbed when I hear or read of folks bashing banks for real estate and general economy woes, etc. In my opinion, the problem is primarily due to greed by both lenders and consumers. Everybody was trying to get rich and the pyramid scheme fell apart.

This morning my wife and I closed escrow on a house in Stockton, CA, eventually intended as a second residence. The home sold for $305,000 in 2005 and was financed 100% with a first and second mortgage. The real estate market peaked around mid-2006 and in early 2007 the owners refinanced their loans and apparently took some cash out, getting a total loan of $314,500. Although they continued to hold their jobs, they decided in 2009 that it wasn't worth making payments on a mortgage much greater than the value of the home. About a year ago they moved out and took the appliances with them. It wasn't good enough that they weren't losing a dime walking away from the home, they had to commit a crime and remove appliances as well. In early 2010 we attempted to buy the home on a short sale but a mortgage insurance company (i.e., loan guarantee) would only release the owners from liability if they contributed $25,000, payable over 84 months. The owners initially indicated they would go ahead and do that but then had a change of heart. Their lender foreclosed and we just bought the home for $105,000. Probably a little above what it's worth in this condition, though it should be worth more than our investment once we make some repairs, etc.

So the lending agencies (bank, mortgage insurance company, Fannie Mae) has lost well over $200,000 and part of that is because some greedy owners ripped out the appliances.

If people bought homes as shelter rather than viewing them as "get rich" investments, I don't think we would have ever seen the ridiculous escalation in home prices nor the collapse in values.

Just my $.02!

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