It does, because it affects their credit worthiness, their ability to draw loans on that equity, etc. And yes, many people sell their houses all the time. The "unless they plan on selling" is kind of a silly thing to say.
I'm not sure why it would affect their credit raiting. As to the selling, yeah, as in if they have negative equity in the house. Other than that, it's just the price of the house.
If it were conceivable that the companies could crash and only the greedy execs and others at fault would get burned, including dumbass homeowners, then I would say let it crash and let them burn. Unfortunately, they'd take down a lot of "innocent" people with them.
Yeah, and right now I haven't heard of many companies with greedy execs gettin burned and so far it's generally been related companies that have been burning instead.
As far as the loans are concerned, you could maybe make it where any interest-only or balloon-payment type loans must be treated as basically what amounts to a lease-to-own situation, where the homeowner could simply turn over keys to the house to the original mortgage company and walk away without owing anything at the end of the variable term, and the mortgage company would be stuck with the house to sell.
Then it wouldn't be a mortgage, it would be a rental. It also wouldn't create any responsibility on the part of the person.
While this would not eliminate all risk (of course), it seems like it would be in the mortgage company's best interest to only offer such loans in areas where they are freaking sure the market is solid.
It would eliminate risk on the part of the person taking out the mortgage. That is not the current problem. It would actually increase the risk on the part of the bank. Which, while that is the goal, this would lay it all on the bank. Basically, you just came up with a rental, not a mortgage.
In other words, without having to eliminate such loans altogether, make it to where they'll only offer such loans if they're willing to deal with it if the customer walks away, which would generally only happen when there hasn't been an increase in value.
But the idea in taking out a mortgage is that the individual is taking some risk in buying the house, not garunteeing that it will go up in value. The risk on the lender is that the buyer will not be able to pay. Essentially, you're changing the risk for the worse. The idea is not to eliminate the risk from the buyer altogher, but to increase it some for the bank.
No bank wants to be stuck with a house that's not worth what they paid for it. They don't want to be stuck with a house at all, of course, but one on which they've lost money least of all.
But doing this makes it even easier for the individual to walk away and stick the mortgage owner with the house. It essentially eliminates all risk the the borrower, puts it all on the lender, and if the bank sells the loan, they still have no risk.
As to choosing which execs should be cut loose from the strings of their golden parachutes, they could establish basic, generalized guidelines and appoint what basically amounts to a financial court martial. A tribunal of people who would know better could be selected and they could rule based on the facts in each case. The problem would be the fraternity getting in the way, that is if these guys are in bed (or just in industry) with the individual being examined, then they might give them taxpayer money even if they don't deserve it. So there'd have to be some sort of openness policy and the possibility of being overturned by some Congressional committee or something.
Again with the tax payer money. The F&F execs are not getting any parachutes, from my understanding. The only ones who are getting money, are getting it from private companies that are buying them out. AIG isn't firing the CEO. F&F are gone. No other companies are getting money that are getting taken over. And any company that is getting a loan should not have the CEO fired just for that.
