Funny news story out of Florida last week: Homeless Man Gets Five Fannie Mae Loans In Florida:
The St. Petersburg Times found a homeless man who had bought a few houses. “After struggling much of his adult life with unemployment, homelessness and drug addiction, Johnny Moon Sr. died last year on a dirty mattress on the floor of a small home near Tampa’s College Hill district. Moon left behind a watch, a flashlight and a wallet containing a solitary dollar bill. And more than a half-million dollars worth of real estate.”
One of the comments caught my eye:
I don’t see why loans to the indigent are such a big deal. In a booming real-estate market, when the vast majority of prices are rising, why shouldn’t banks loan to everyone, and anyone, who wants to borrow against a house? The vast majority of the properties are gaining 20% a year, so who cares if a few outliers are actually duds? You will make money on volume (i.e. there will be quite a few properties that do appreciate). And it doesn’t matter that a given borrower is unable to make good on the payments. Just sell the house six months later, and the loan is paid off. Everybody wins!
Anyway, don’t blame the lending institutions. They only market mortgages that are acquired by after-market investors. It’s the pension funds and foreign invstors who are really eager to give their money to anyone buying US real-estate. They know that US real-estate prices always rise substantially, so any potental losses from loans are minimal.
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