Warning: Do not draft your business plans on this post.
I talked about foreclosure, a closely watched sign of the economy in this housing-driven crisis.
I later found that foreclosure happens in many other forms. Here are two.
The above graph is quite telling. Housing prices are deep under water, sometimes over 80% under mortgage owned (hence more under purchase price). Absurd. The funny thing is, home owners like this should foreclose, rationally. If you owe $300,000 mortgage on a now $50,000, you should let foreclose the house and then buy it back, earning somewhere less than $250,000.
Another thing is buyer fraud. As illustrated, it works like this: you find a $300,000 home, get an appraiser (who’s willing to lie) to label it $600,000, get a mortgage of that amount, pays $300,000 to the seller, then default and get away with the surplus.
What’s credit’s worth?
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