Originally Posted by Snake Doctor

The problem with this....matter of fact the problem that led to most of these problems is that the banks don't hold the mortgages anymore.

They came up with these nifty "collaterallized debt obligations" or CDO's as they're known in the industry....and the mortgages were all packaged together and sold as bonds/commercial paper on the open market.
So in alot of cases, the company that services your mortgage doesn't have the authority to renegotiate, because the actual mortgage is owned by thousands of individual investors.

The banks had no problem giving out risky loans because they didn't have to hold them to maturity, they sold them on the open market and made their money at the closing table on points and fees.

The businesses in trouble right now because of this aren't the banks who made the loans, it's the brokerage firms who bought all of the commercial paper that was backed by the mortgages. (i.e. Bear Stearns)