Reply to What I don't get: When people complain that they are drowning because their house is underwater

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Reply to "What I don't get: When people complain that they are drowning because their house is underwater"

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[quote=Anonymous][quote]My point is, I can see how someone could easily get caught up into buying more than they can afford or pushing their incomes. Then their adjustable mortgage goes up at the same time their house value goes down. And they can't refinance because suddenly their loan amount is worth more than their home. So they legally CANNOT get a loan for more than the value of their house. This is why people freak out when the value of their house declines. Because it impacts their abilty to refinance. [b]I actually think this law/rule needs to change. If you have a mortgage on a house, you should be allowed to refinance for that same amount[/b].[/quote]

No matter what the current value of the house is?  Sorry, but that's insane.  After all the wailing and gnashing of teeth over those evil banks which gave out all these terrible loans (and I don't totally disagree with that, by the way), you suggest that lending institutions be permitted (or even required) to refinance a loan no matter what the value of the underlying collateral is.

You know what another definition of a bad loan is?  A loan for which the collateral securing the loan doesn't fully cover the loan.  The only way to do this is with significant government subsidies or insurance.  As a business proposition, it's absurd.  [/quote]

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