@Val123: not talking about that. Talking about 30-year loan on a house valued at, say,
$500K.
Two years later, house is worth $350K.
Paid $100K cash down payment, standard 20%. Still owe
$390K (having paid off only $10K in 2 years because young loans pay off mostly interest).
So: Spent $100K plus $60K in payments, still owe $390 on house worth $350.
Bank sits and receives payments. “Owner” has already spent $160K, owes $390,
add that up, hmm, (licks pencil), $550K.
Bank has (I repeat) done no work beyond levying fees on buyer. Bank can repossess house if buyer cannot or does not make payments. Bank licks chops! Bank cannot lose. Payments come rolling in OR bank gets house now worth less, but can sell it for that, thus collecting $200K less than house was worth 2 years ago, but what do they care?
They still get $510 (down payment plus many months’ worth of interest payments plus money they collect from sale of house). Meanwhile, feds give banks stimulus money. Banks enjoy it and, now that they see which way the wind is blowing, refuse to lend it out.
Discuss.