Vendot

Say the bank client defaults on the loan. The bank may, if it was responsible, have loaned you a smaller amount if they took a decent size deposit but they are left with a housing stock which they (a) cant liquidate easily because no-one is buying or (b) sell at a considerably discounted price and only recoup of a small portion of the loan they made (ie they lose money).

So the bank is stuck in that sense..... but if banks arnt issuing mortgages, what is the hope that the properties on their books will rise to the levels they were at before this crisis began?

Because house price growth in the last few years around the world has been fueled by the availability of mortgages and we all know its not going to go back to what it was like before.... without large availability of loans, prices can only keep going down. So does this mean that if house prices fall more, this makes the situation more serious?

Im confused.........

Is the US government attempting, with this financial bailout, a more gradual deleveraging?

King of Queens

don't know but it's quite the mess.

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Vendot

Because if thats what theyre trying to do wont it take years to substantially reduce the liabilities, as loans are paid off and also take years for the properties to regain their pre-crisis values?

If thats an issue then this could be with us for maybe 10 years or more..... am I wrong?