Today's Huge Surprise: Banks Don't Want To Forgive Mortgages

Banks give back money?? Surely you jest!

It may not come as a surprise to you that banks aren't really being very receptive to the idea of forgiving some of the debts of underwater mortgage holders.

In fact, this might well have come straight from the pages of "Duh! Magazine: A Journal For Dullards (this month's cover story: The Sun--It's Hot There!)". Of course, the banksters are all making lovely noises about how "unfair" it would be to those mortgage holders who've been regularly paying off the gigantic protection racke--uhh...I mean, BEING RESPONSIBLE and paying on time. Such a move "could be harmful to consumers, investors and future mortgage market conditions" (David Lowman, JP Morgan Chase, JPM) and "could raise issues of fairness" (Sanjiv Das, Citigroup, C).

Of course, if you were to ask Das why he simply doesn't forgive a chunk of EVERYBODY'S principal, which would raise no issues of fairness at all, he'd probably choke on his own tongue.

Because what neither Das nor Lowman will spill the beans on is that, chances are, most of those homeowners are delinquent on early, interest-heavy payments rather than later, principal-heavy payments, so if principal were forgiven, it'd cost the banksters whopping interest payments. Since the housing boom started about ten years or so ago, give or take, it's reasonable to assert most homeowners weren't far into those mortgages in the first place.

So color me really not surprised that the banks aren't keen on the idea of just "forgiving" some principal, even if it would be a huge help to a lot of people.

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  • Millard

    April 16, 2010

    Uh, how is it "giving back" money? These are loans they've made and the people can't pay them. It's not money given "back." If you cannot pay your mortgage, than the entity that loans you the money to do so -- the bank -- gets the house.

    As for "even though it would help," I bet you're against me taking all the money you have and forcing you to work for free for me, say, for a year "even though it would help a lot of people." Banks aren't in business to "help people," and neither are you, unless you're paid in good vibes.

  • Chico

    April 16, 2010

    By the way, your site links the word "loan" to -- an eeeeeeeevil bank. Hahahaha. So, you have ads on your site? Why? Are you trying to make a business?

    Forgiving loans to people and giving them discounts on houses will not help those of us who pay our taxes and our mortgages -- and certainly not to those of us who chose smaller homes rather than bigger ones. Is it fair that wealthy people who walk away from mortgages should get them paid for? You really have to thnk these things out, STeve, and not just buy what you're fed.

  • SteveAnderson

    April 16, 2010

    No one's suggesting "walking away", Chico. What I'm suggesting is taking a percentage of the mortgage--which in turn reflects the drop in home values over the last several months which is no fault of the mortgage holder--and adjusting accordingly. Sure, twenty, thirty years ago this would be unthinkable, but so would a home losing fifty percent of its value unless it were suddenly next to a big sinkhole. As a mortgage holder myself, I certainly wouldn't mind if my principal were adjusted to reflect the home's ACTUAL current value. Oh, and I don't control where the links point to when they're double underlined. That's a function of the publishing software.

    And Millard--it's a headline, for crying out loud. I only have so much room. And it would be giving back money just a bit as it would reflect less taken. And your example is badly flawed--a better one would be "you remove a portion of my pay because the value of my work has fallen". That I'd go along with.

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