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Two Major Banks Now Support Cramdowns

Huffpost had an interesting article on their front page yesterday.

Color me cynical, but i’m not heartened by the phrase "segment of borrowers". If I were a betting man, i’d lay odds that that particular "segment of borrowers" are involved in commercial real estate as the damage has been done ( over and over ) in the residential real estate market.

Putting on my less than cynical hat, I still see this as a pretty obvious "in the bank’s best interests" move. They’re currently faced with an all or nothing prospect. People have been catching on that walking away from a house so far underwater you’d get the bends fetching the mail too quickly, is an appropriate business decision. This is their way of at least recouping some of their soon to be staggering losses while being able to tie borrowers to homes they still can’t likely afford.

Two things though. We haven’t seen the bottom yet in housing. I fully expect it to tank when the banks can no longer afford to keep foreclosed houses off the market and aren’t able to postpone foreclosures on a big chunk of properties that have been stuck in the NOD phase of the process for months ( I have a friend who was in a house for 8 months after she stopped paying her mortgage before the bank even started the foreclosure process ). Until then, enjoy the ‘recovery’. It’s jobless at present, and once commercial real estate tanks it will be recoveryless too.

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