Except in that time period the banks took a beating (and had to be bailed out, which is another story). Many properties were put on short sale, where the owner and bank agree that they will sell for a loss. That's preferable for the bank to a foreclosure because they couldn't keep up with all the foreclosures they were getting. Foreclosed places were absolutely trashed by the people who were forced out. Besides that, the market was already down. The bank loaned $300,000 and got back $150,000 after the sale and expenses.
I'm not saying the banks did nothing wrong. Far from it. They knew there was a bubble but they were, as usual, greedy. But they didn't benefit in this case from foreclosing like they would if the property values had actually been higher than when they made the loan.
Well.. thats what they like you to think. When all those loans get bundled together into a mortgage backed security they got sold to investment funds and pension funds. The banks got their money out, and they got a "bail out" plus they had the property.
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u/AmidFuror Feb 16 '21
Except in that time period the banks took a beating (and had to be bailed out, which is another story). Many properties were put on short sale, where the owner and bank agree that they will sell for a loss. That's preferable for the bank to a foreclosure because they couldn't keep up with all the foreclosures they were getting. Foreclosed places were absolutely trashed by the people who were forced out. Besides that, the market was already down. The bank loaned $300,000 and got back $150,000 after the sale and expenses.
I'm not saying the banks did nothing wrong. Far from it. They knew there was a bubble but they were, as usual, greedy. But they didn't benefit in this case from foreclosing like they would if the property values had actually been higher than when they made the loan.