As the inventory of REOs builds, banks will become amenable to holdingpayments at their original rate.
Yes, except for two things, one addressed below and the other one is that in
many cases the original paymens not only did not pay any on the principal but
didn't cover the interest on the loan. For the banks to continue with that
loan at the original rate, they'd have to be bleeding money which they can't do.
A dangerous condition exists if mortgagors react negatively to the
news that they are making payments on a loan that is greater than
their home is worth.
Dangerous for whom? If a person finds themselves paying for an asset that is
worth far less than they are paying, it only makes sense to nullify that
agreement as quickly as possible and quit doing that.
The only cudgle to hold
over their heads is that their "credit" might be ruined. For many of these
people before the bubble they would not have qualified for the loan and here after
the bubble they don't qualify for any such loan so it is an idle threat to
give them a bad credit score.
This is an example of the power of the
sensationalist and negative media.
Just the opposite I'd say. The fact that so many people bought into the
housing frenzy was the result of sensationalism and media hype. What follows is
just the natural consequence of falling for that hype.
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