Can someone please tell me what is happening with the banks and why so many people are losing their homes to?

Question

foreclosure? I don't watch the news much, so if you could just briefly explain what is going on here I would appreciate it.

Answer 1

Yes, the banks got greedy and lent to people they shouldnt have and now the market is falling because they are defaulting. The shame is there are ways for people to save their home by working with the lender.

Answer 2

In one word... greed.

Banks wanted to make loans to everybody to increase their profits.  Borrowers wanted more home than they could afford, so the banks offered them "stated income" loans with an adjustable interest rate, basically the people said "I make this much" and the banks didn't verify it.  Housing prices climbing rapidly so more and more people jumped into the market to buy a house, live in it for a while, then turn around and sell it for a big profit.

Now, the interest rates start adjusting upward, always upward... pretty soon, the payments were more than people could afford or they lost their job, so they started having problems making the payments so they tried to refinance.  Then the housing bubble burst, and prices started dropping.  Suddenly their house is worth less than they owe, so they can't refinance their way out of trouble... They have a choice of short-selling (selling for less than they owe), or foreclosure.

The winners:  greedy bankers and mortgage brokers.  The BIG losers:  their clients.

Answer 3

brief explanation:

Banks loaned money to people that couldn't afford the payments.

Banks then sold the loans to other banks and institutions

Cost of living went up

People couldn't pay their loans anymore and defaulted.

Banks took huge losses due to these defaults.

Answer 4

To much speculation because the banks were forced to give loans to people who couldn't afford them. To much government interfering with the banks in order to make sure all people were home owners, even if their credit was not good.

Their were 0% down loans, no income verification loans, and ARM(adjustable rate mortgage) loans out their. In other word the market was like a free for all to brokers(the people that help home buyers get loans) and builders.

The banks thought they were safe because the value of homes was climbing for a long time. So if someone just said s***w the loan then the bank would still make money, because the value of the house would increase past the loan amount.

Don't worry. The economy is not as bad as the media would have it. Its solid. We haven't enter a Recession all this time but many people were anticipating it. Things will level out.

Theres no soup kitchens on the horizon so don't worry about it.

Answer 5

back in 2000 banks interest rates where very low. which atracted people to go for bigger better houses, houses they couldnt really afford in the long run and banks had alot to do with this since they handed out the loans.  so when people start losing there houses interst rate goes up.. and that creates more losses for many people. sad but true!

Answer 6

i don't know that's the first time i'm hearing this.

Answer 7

Our country is falling into a recession. Which is the step right before a depression.

Answer 8

In brief, many people wanted to chase the American dream of owning a home.  This started pushing housing prices up.  Speculators saw this and started buying homes and lots with the aim to flip them (sell them quickly) for profit.  This put more pressure on prices, sending t hem further up.  Now, houses were getting beyond people's affordable range, but they still wanted to buy, so the banks started offering easy loans with interest escalators.  

These loans would start with artificially low interest rates, which lowers payment.  Alot of people bought houses at these initially low rates, both to live in and flip.  Now, all of a sudden, the housing market began to slow down -prices weren't going up as fast as they once were and speculators started getting stuck with property they couldn't flip.  So other speculators started pulling back, putting downward pressure on housing prices.  Simultaneously, all the interest escalators started to kick in and folks mortgage payments started to go up to where they couldn't afford them.  So folks tried to refinance, but with housing prices down, they had negative equity (owed more than the house was worth) and banks won't finance for more than a house is worth.  Well, since the folks couldn't afford the new payments and couldn't lower them by refinancing, the only thing left was defaulting on the mortgage, causing the foreclosure.  Now the banks had all the properties they couldn't sell for what was owed, so they took a loss on these mortgages, and bank earnings crashed - the more non-performing loans a bank had, the worse were the losses.

These losses, of course, forced stock prices down and folks really began to panic.

That's the short version