Quote:
Originally Posted by the
In a non-recourse situation (i.e., where the bank can only look to the collateral in the event of a default), the value of the collateral is everything. What else is there? That's their ONLY remedy, they better be darn sure they know what the value of their remedy is, if not, they have no meaningful way to price risk.
But when the homeowner put no money down, and has no skin in the game, it makes it much easier to walk.
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I am in agreement 99.44%.
If banks were truly concerned about valuation of collateral, they could order appraisals which are not based solely on comparable sales. The appraisal could instead focus on income production (rents and cap rates) or replacement cost. This would negate the bubble effect and would have severely limited upside bubble effect . Of course, that would have curtailed profits. Oh snap!
Also, there is a strong correlation b/t down payments and default levels. Folks act differently when THEIR hard earned cash is on the line. Wow. You don't say.