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> Because it increases the risk of default. For who? Banks don’t hold mortgages on their books, they sell them to investors. I don’t think you understand how m
by quickthrowman 4y ago
> Because it increases the risk of default.
For who? Banks don’t hold mortgages on their books, they sell them to investors. I don’t think you understand how modern finance works.
- nameisname 4y agoAgreed. OP doesn't understand the situation.
- sbarre 4y agoYeah I guess I am not trying to provide a super in-depth explanation of how finance works here, since that's not the topic we're discussing. I am not a financial expert, but I have been told by professionals, and read in credible publications, that financing entities are not thrilled about the idea that people can effectively 100% finance additional home purchases using HELOCs, rather than having a cash downpayment. That's the point I was making. My apologies for drawing an incorrect conclusion on the unrelated details.
- bombcar 4y ago100% financing is problematic mainly because the "owner" has zero incentive to not walk away if the house goes below purchase price even if they could afford to keep up the payments. This puts the "bank" (read: bank and the investors the bank sold the loans to) in a precarious position, as a slight downturn in the market could result in a large percentage of loans defaulting.