5 ms·

> The bank took their house and sold it at auction for very little money. So they lost everything. Perhaps it's a bit of an off-topic tangent but this sentence

by eecc 7y ago

> The bank took their house and sold it at auction for very little money. So they lost everything. Perhaps it's a bit of an off-topic tangent but this sentence caused my ire. Why do banks always throw people under the bus when it comes to foreclosing on someone? I can imagine that it's often about reclaiming a residual fraction of a mortgage so even a firesale auction can turn a profit but why can't they bloody damn sell a property at market rates, cover the debt and leave the rest to the debtor? Heck, even take commission for the sale! Why the ruthlessness? It's abominable.

loxs 7y ago
Because everything is bound to power and not to morals or law. The latter two are only sometimes and to a varying extent hurdles to the first. This is true in every social and political climate. Socialism doesn't make it better (actually may make it worse IMO). That's why I believe that the only correct individual motivator should be to be free and strong. And never rely on the government, banks and other parties that can and will make you dependent. Take on as little debt as you can. Pay as little tax as possible and/or move to countries where this is possible. Possess as big and as diverse investment portfolio as you can. Reside in countries where it's allowed to possess guns and do so. Make friends with like minded individuals. Yes, I am a libertarian.
- icebraining 7y ago
  How do you get an investment portfolio without being fully reliant on Wall Street or equivalent? Seems a bit wishful thinking.
  - loxs 7y ago
    Property, physical gold and other valuables, appreciating or slowly depreciating physical goods. Financial instruments in various countries (I am not US based) etc. Of course, also on Wall Street
- votepaunchy 7y ago
  > And never rely on the government, banks and other parties that can and will make you dependent. [...] Reside in countries where it's allowed to possess guns and do so. How do you obtain bullets? And food? Do you make and grow your own, and from what materials?
  - loxs 7y ago
    Didn't say "never use", just "never rely". Have a second plan to the extent practical.
systemtest 7y ago
Quick cash. Selling at auction means guaranteed money in a matter of days. When the house is sold on the market, it can take months to sell it. In those months the bank is losing money as it's tied up in the house and not actively generating revenue. If the home owner has a mortgage of 50% against the home, it only has to sell for 50% market rate for the bank to recoup their investment fully.
- ianai 7y ago
  Foreclosed homes are also sold as-is. The process stinks. In the case of ARM mortgages, the bank often goes through this because a balloon payment comes due. The bank essentially moves from a situation of getting money on their investment to getting nothing simply by forcing people from the home. It’d be better for everyone if the parties involved just renegotiated the deal to keep people in the house and paying their mortgage.
  - deleted 7y ago
    [deleted]
chrisco255 7y ago
Many bank owned properties are listed for sale with a realtor. This is not uncommon at all. Foreclosed properties are usually listed at below market value for quick sale though. Not sure why they chose auction in this case. It might be because it was an unusual property. Any time you have an unusual structure or property it can be difficult to sell and difficult to appraise.
WalterBright 7y ago
> why can't they bloody damn sell a property at market rates, cover the debt and leave the rest to the debtor? That's what my mortgage contracts have specified. I didn't add the clause, it was a standard boilerplate contract. BTW, buying a house at auction is selling it at market rate - the market rate being what people are willing to pay for it.
- setr 7y ago
  I would imagine that's a fairly small "market" and doesn't really reflect the broader market. It's "a" market rate. And it sounds like this isn't a case of what people are willing to pay for it, but rather what I'm willing to sell it for: that is, the bank just wants to get rid of the house for something, even if it's highly innefficient and people were willing to pay more.
  - deleted 7y ago
    [deleted]
- mtnGoat 7y ago
  correction: its what cash buyers are willing to pay for it. thats a small fraction of the entire market.
  - WalterBright 7y ago
    The instant cash price is going to be less than list it wait for months price, by approximately the cost of having the house sit empty for months (including the interest on the money tied up in the empty house). If the instant cash price was less than that, savvy people looking for bargains would bid it up to that.
danjac 7y ago
The recession in the early 90s in Finland was partially the result of the collapse of the USSR (Finland had exclusive access to this market, despite being a Western democracy, since WW2) but also due to a banking sector that was liberalized too quickly in the 1980s without proper legal oversight and was giving out loans and mortgages like free cocaine to a citizenry who had no real experience of managing serious debt. People took out huge loans using their homes as collateral - either to support unviable businesses or buy that new summer cottage or boat - and were dangerously overexposed, a bit like the subprime crisis in the US in 2008. The banks of course went into panic mode and clawed back what they could. I personally know quite a few people who lost their homes in this recession, and the country took years to recover. I'm not an economist and so this is just a second-hand account of this period but it seems similar to what happened in Iceland in the early 2000s - too little oversight from government and too much greed and naivite from the people.
linuxftw 7y ago
I someone could sell their house for a profit, they would probably choose to do that rather than letting the bank foreclose. Short selling is another possibility, where the bank lets the borrower off the hook for some fraction of the principle.
bluGill 7y ago
When a house goes to auction and sells for very little money that says something about the house: the previous owners destroyed it. They probably took the stove, carpet, light fixtures and so on. They cut the pipes to get the sink out and left the water on while doing so: the resulting flood and the water bill are the bank's problem. Of course by the time the bank knows this the damage is done and the house is worthless. If the owners know they are in trouble and have options and sense they will contact that bank. There are programs to skip payments (the bank makes a lot of money off these in the long run - but this is your best way to get out of a temporary problem). There are programs where the bank will let you "short sell" where the bank counts the house paid in full when you sell it for less than you owe (you lose your down payment so it isn't a good for you but it is better than the alternatives). The bank often knows of assistance for people in life trouble. None of these are possible though if you don't try to work with the bank. Banks want their money back. They do not want to own houses. They do it - but only when they have no other options.
leetcrew 7y ago
because it's a bank, not a real estate agent. they want to issue loans, not sell houses. the bank typically doesn't want to foreclose a mortgage if there's any chance you could continue making payments. if they do, the best they can hope for is just getting their money back. putting the house on the market for an extended period of time (and possibly paying an agent) just increases the chance that they don't get their money back. if you go with a smaller lender you might be able to negotiate better terms for foreclosure, but anything you require of the lender that increases their risk will be reflected in your interest rate.
howard941 7y ago
This may not be the case in Finland but in the US the vast majority of mortgage loans are pooled into investment vehicles/bonds that separate the loan & mortgagee from the mortgagor with the day to day servicing and rehab decisions made by a third party lowest bidding servicer having incentives different from that of the bondholders. But for the intermeddling servicer the bondholders would almost certainly come out ahead by doing workouts with struggling homeowners but the servicers lack those incentives and often make money putting the loans into forced sale forclosures. 11 years ago we in the US went through this mess without learning the lessons that would have been learned had the powers that be decided to let everyone sleep in the bed they made rather than foaming bondholder runways with the bodies of mortgagors.

by eecc 7y ago

loxs 7y ago

Because everything is bound to power and not to morals or law. The latter two are only sometimes and to a varying extent hurdles to the first. This is true in every social and political climate. Socialism doesn't make it better (actually may make it worse IMO). That's why I believe that the only correct individual motivator should be to be free and strong. And never rely on the government, banks and other parties that can and will make you dependent. Take on as little debt as you can. Pay as little tax as possible and/or move to countries where this is possible. Possess as big and as diverse investment portfolio as you can. Reside in countries where it's allowed to possess guns and do so. Make friends with like minded individuals. Yes, I am a libertarian.

icebraining 7y ago
How do you get an investment portfolio without being fully reliant on Wall Street or equivalent? Seems a bit wishful thinking.
- loxs 7y ago
  Property, physical gold and other valuables, appreciating or slowly depreciating physical goods. Financial instruments in various countries (I am not US based) etc. Of course, also on Wall Street
votepaunchy 7y ago
> And never rely on the government, banks and other parties that can and will make you dependent. [...] Reside in countries where it's allowed to possess guns and do so. How do you obtain bullets? And food? Do you make and grow your own, and from what materials?
- loxs 7y ago
  Didn't say "never use", just "never rely". Have a second plan to the extent practical.

systemtest 7y ago

Quick cash. Selling at auction means guaranteed money in a matter of days. When the house is sold on the market, it can take months to sell it. In those months the bank is losing money as it's tied up in the house and not actively generating revenue. If the home owner has a mortgage of 50% against the home, it only has to sell for 50% market rate for the bank to recoup their investment fully.

ianai 7y ago
Foreclosed homes are also sold as-is. The process stinks. In the case of ARM mortgages, the bank often goes through this because a balloon payment comes due. The bank essentially moves from a situation of getting money on their investment to getting nothing simply by forcing people from the home. It’d be better for everyone if the parties involved just renegotiated the deal to keep people in the house and paying their mortgage.
- deleted 7y ago
  [deleted]

chrisco255 7y ago

Many bank owned properties are listed for sale with a realtor. This is not uncommon at all. Foreclosed properties are usually listed at below market value for quick sale though. Not sure why they chose auction in this case. It might be because it was an unusual property. Any time you have an unusual structure or property it can be difficult to sell and difficult to appraise.

WalterBright 7y ago

> why can't they bloody damn sell a property at market rates, cover the debt and leave the rest to the debtor? That's what my mortgage contracts have specified. I didn't add the clause, it was a standard boilerplate contract. BTW, buying a house at auction is selling it at market rate - the market rate being what people are willing to pay for it.

setr 7y ago
I would imagine that's a fairly small "market" and doesn't really reflect the broader market. It's "a" market rate. And it sounds like this isn't a case of what people are willing to pay for it, but rather what I'm willing to sell it for: that is, the bank just wants to get rid of the house for something, even if it's highly innefficient and people were willing to pay more.
- deleted 7y ago
  [deleted]
mtnGoat 7y ago
correction: its what cash buyers are willing to pay for it. thats a small fraction of the entire market.
- WalterBright 7y ago
  The instant cash price is going to be less than list it wait for months price, by approximately the cost of having the house sit empty for months (including the interest on the money tied up in the empty house). If the instant cash price was less than that, savvy people looking for bargains would bid it up to that.

danjac 7y ago

The recession in the early 90s in Finland was partially the result of the collapse of the USSR (Finland had exclusive access to this market, despite being a Western democracy, since WW2) but also due to a banking sector that was liberalized too quickly in the 1980s without proper legal oversight and was giving out loans and mortgages like free cocaine to a citizenry who had no real experience of managing serious debt. People took out huge loans using their homes as collateral - either to support unviable businesses or buy that new summer cottage or boat - and were dangerously overexposed, a bit like the subprime crisis in the US in 2008. The banks of course went into panic mode and clawed back what they could. I personally know quite a few people who lost their homes in this recession, and the country took years to recover. I'm not an economist and so this is just a second-hand account of this period but it seems similar to what happened in Iceland in the early 2000s - too little oversight from government and too much greed and naivite from the people.

linuxftw 7y ago

I someone could sell their house for a profit, they would probably choose to do that rather than letting the bank foreclose. Short selling is another possibility, where the bank lets the borrower off the hook for some fraction of the principle.

bluGill 7y ago

When a house goes to auction and sells for very little money that says something about the house: the previous owners destroyed it. They probably took the stove, carpet, light fixtures and so on. They cut the pipes to get the sink out and left the water on while doing so: the resulting flood and the water bill are the bank's problem. Of course by the time the bank knows this the damage is done and the house is worthless. If the owners know they are in trouble and have options and sense they will contact that bank. There are programs to skip payments (the bank makes a lot of money off these in the long run - but this is your best way to get out of a temporary problem). There are programs where the bank will let you "short sell" where the bank counts the house paid in full when you sell it for less than you owe (you lose your down payment so it isn't a good for you but it is better than the alternatives). The bank often knows of assistance for people in life trouble. None of these are possible though if you don't try to work with the bank. Banks want their money back. They do not want to own houses. They do it - but only when they have no other options.

leetcrew 7y ago

because it's a bank, not a real estate agent. they want to issue loans, not sell houses. the bank typically doesn't want to foreclose a mortgage if there's any chance you could continue making payments. if they do, the best they can hope for is just getting their money back. putting the house on the market for an extended period of time (and possibly paying an agent) just increases the chance that they don't get their money back. if you go with a smaller lender you might be able to negotiate better terms for foreclosure, but anything you require of the lender that increases their risk will be reflected in your interest rate.

howard941 7y ago

This may not be the case in Finland but in the US the vast majority of mortgage loans are pooled into investment vehicles/bonds that separate the loan & mortgagee from the mortgagor with the day to day servicing and rehab decisions made by a third party lowest bidding servicer having incentives different from that of the bondholders. But for the intermeddling servicer the bondholders would almost certainly come out ahead by doing workouts with struggling homeowners but the servicers lack those incentives and often make money putting the loans into forced sale forclosures. 11 years ago we in the US went through this mess without learning the lessons that would have been learned had the powers that be decided to let everyone sleep in the bed they made rather than foaming bondholder runways with the bodies of mortgagors.