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What happens if they fail?
#1
I have a question.... what happens if the bailouts never happened and the big banks failed? Fannie and Freddie included.

Basically what happens to my home? I'm current on mortgage payments. I think Fannie holds my mortgage, or at least it did until the Countrywide bullsh*t where BOA bought them out. I'm with BOA now and i think Fannie still holds the note.

Either way, If Fannie fails, the domino chain is going to pull everyone in on the downfall. What happens to me and my home? Do I lose it or do I wind up keeping it - free? Does another bank buy the loan? Who if there is such a catastrophic failure of the system will buy all those loans?

I'm no economist and I barely can balance my checkbooks - I've always wondered what would happen if the whole thing collapses to anyone with a loan with these people. Who gets ultimately screwed?
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#2
Joan, you have a legal contract with the lender. If it goes bankrupt someone will assume the contract, probably through a bidding process, and you will just continue on making payments with the new 'official' lender.

I'm not an expert but believe this is what would happen. For example, Wells Fargo bought out Wachovia during the crisis, and they assumed the assets, and liabilities, of Wachovia. Also, you pay insurance through FHA probably, which protects you from losing your loan.
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#3
Right, but that's one bank to another. I'm talking that Tsunami of a crash that those bogus bailouts were given out for. Keeping Fannie and Freddie afloat and everyone along with. Are there enough banks to buy up those loans in such a circumstance of total collapse?

I would think no and I get to keep my home free and clear since they screwed up and not me. I dont' see how anyone current on their contract would have their home taken away if the bank failed to manage their money properly.
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#4
Joan Wrote:Does another bank buy the loan? Who if there is such a catastrophic failure of the system will buy all those loans?
Yes. Even in case of general bankrupcy of all the banks, there would always be buyers. But not at the original price of the mortgage.

They call it buying for x cents on the dollar. For example they coulg buy your mortgage for 10 cents on the dollar which means that they would paid only 10 cents for every dollar they have the right to collect from you. eg. If your mortgage is $100,000 then they "buy" it for $10,000 but you still owe them 100,000. If you pay the $100,000 as the law oblige you to do, they'll make a benefit of $90,000.

In case economic/financial collapse the price of the mortgage or of other debts can fall very very low, enough low to find buyers. But you stil owe the same amount.
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#5
OR if they bought it for ten cents on the dollar they might come to you and say "Just give me 50 cents on the dollar and we'll call it even."

But what's more likely is that they'd buy them in huge lots, write off/foreclose the deadbeats and charge you full price.
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#6
(11-10-2011, 02:40 PM)Pixiest Wrote: OR if they bought it for ten cents on the dollar they might come to you and say "Just give me 50 cents on the dollar and we'll call it even."

But what's more likely is that they'd buy them in huge lots, write off/foreclose the deadbeats and charge you full price.

Of course. The miracle of modern state supported finance: Transferring wealth from the poor to the rich.

Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
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#7
mm... so if someone gives you $100,000 and sells your debt for $10,000 and the new owners make you pay $50,000, then from whom did wealth transfer?

Likewise, if someone gives you (and a bunch of other people) $100,000, sells your debt, and some people don't pay anything back and you pay back all $100k, then from whom did wealth transfer?

It looks to me that wealth went from the original lender to both the new lender and the dishonest poor people they lent the money to.

Now realize that they (the original lenders) were forced to loan this money from a crooked federal government that equates untenable loans with compassion. (as a means of buying votes) and you'll see who the real crooks are.
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#8
Hey, I got my loan fair and square. I didn't squeeze a loan that I couldn't afford. S6
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