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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: David Jones who wrote (41157)9/9/2005 8:37:54 PM
From: Elroy JetsonRead Replies (2) of 306849
 
That's one theory, but I have found its better to shut down problems early.

I once worked with Bill Bone, the developer who built much of Palm Desert. He sold detached condo style homes around a golf course and retained ownership of all the Club House businesses in each development. He also made the first mortgage on many of the properties he sold. He kept these variable rate mortgages with a "warehouse loan" from Bank of America.

He told me that he always filed default papers once a mortgage payment was more than five days past due because it was kinder to the home owner and prevented problems for him. Because of this he has never had even one single foreclosure.

Now this may seem counter-intuitive, but the home owners who are struggling to hold onto their home get early notice that they should consider selling their home if they can't meet the payments.

Most bank losses on home loans occur because the stretched home owner struggle to meet payments in a downturn, as the value of their home sinks month after month. By the time the forgiving bank gets the property back, there is a huge deficiency.

The Sandlers who run Golden West Financial (GDW) also follow this philosophy. If someone can't afford their home, why string them along with false hope?

Clear-cut boundries prevent problems.
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