Skip to main content
No. of Recommendations: 5

Who eats the loss?

If we write down the current loan to current market conditions someone needs to eat that difference. Hypothetically who should eat that loss? The Govt for failure to regulate? The banksters for preying on the ignorant? The borrower for failure to account for rainy days and bubbly markets?

If we allow current upside down loans to refi who owns the risk that lies between the market value of the property and the mortgage? If it is a government program then would it be the government? If it is the government's problem what keeps the borrower from walking away? If it is the government's problem why should banks bother to manage their risks?

As a tax payer who managed his finances and that is now on the hook for 1.4 trillion of debt used for bailout and stimulus how much more OUGHT I pay for the mistakes of others? What argument compels me to believe it is in my best interest to eat someone else' risks or losses?

Re-inflate the asset and it is artificial and unsustainable. Mark down the loan and the loss must be absorbed somewhere. Refi the loan and there is still is not enough collateral to support the loan; the better risk adjusted rate is the higher interest mortgage.

The best way out is down the long ugly road that allows the market to set prices and interest rates.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.