About this housing market businesswhat happens to the houses?

Brittney
Ok so- Shady Mortagage Company had too many foreclosures, and so they are going under. What happens to the people who have been able to pay their mortgages? What about all of the houses that have already been taken from buyers? Are the houses just sitting around empty? Wouldn't it be better for Shady Mortgage Company to try and refinance the houses so that people can stay in them? I mean maybe Shady Mortgage won't make as much money, but at least they won't go bankrupt, right?

Clementine
First off, love the mortgage company name. "Shady Mortgage" - I'd go there for all my sub-prime mortgage needs.Anyhow, they may not even hold the loans themselves, they probably just put together the loans between the banks and borrowers and then group a bunch of loans together and re-sell them to a bank or wherever. Thus, they are going bankrupt because they can no longer sell the loans, ie the banks and everyone else is scared of these products so they can't find financing for these deals.Still, assuming they hold some loans these loans will be re-sold to someone (for whatever they can get for them) and the proceeds will go to the shady's creditors to reduce those debts (assumedly they will still be way in the hole or they would not have had to declare bankruptcy). So the people with the mortgages are not affected, they just start sending their payments to whoever buys their loans. Likewise is someone with one of these loans stops paying it is now the problem of the new person holding the loan and they will handle it the same as usual (foreclosure process). For the houses taken from buyers (by shady mortgage before they declared bankruptcy) they sold these on the common market for whatever they can get. For any still unsold ones that is the problem of whoever buys the mortgages (yes even teh defaulted mortgages will be resold for something).Hope that helps.

Fermin
It's the shady buyer's responsibility to pay their mortgage on time so they don't lose their home and it's their responsibility to try to work it out with the lender so the lender doesn't have to foreclose on the property. The mortgage company faciliated the loan to the borrower, it's not responsible for making them pay for it. Although I do believe that many shady mortgage brokers, loan officers, and borrowers got in over their heads and now the lenders are faced with overpriced homes in foreclosure that they can't get rid even in auction because they are owed more than the house is worth. But it's not small time lenders that are going under, it's some of the big ones too, so everyone's hurting.