Foreclosure Stories

I know many folks who about to foldm or trying to holdm. Here are a few foreclosure stories.......... 1. A person in their 30's buys 1.2 mil in real estate a $800K rental and $400K house. This is on stated income and they have no job. She immediately they take out a $100K 2nd mort to live on. The bank shuts down the second mortage.........and guess what the person has to get a job. The rental property has neg monthly cash flow of over $2K per month. 2. A young couple buy a house for $600K. They take out a 2nd mortgage to finance a competition speed boat, SUV and down payment for an investment property in another state. They buy the rental investment property site unseen. They then borrow $12K from a family member to buy a 2nd auto. The primary residence has sunk in value to about $300K. They have stopped paying on the 2nd mortgage. 3. A 3 way investment team buys a $680K house. They split the mortgage 3 ways. All around them houses are foreclosing so they put theirs up for sale for $600K. No buyers so they decide to walk. They have not payed on the mortgage since March. The bank seems to rather carry this house on their books than push the foreclosure. Everyone is playing dumb, the bank acts like they have a good borrower and loan and the real estate speculators play dumb in terms of what happens next. This house is worth about $300k maybe $350k tops. I know at least 3 more foreclosure stories but my point is that these bad loans need to be unwound. I suspect there are countless loans out there that need to foreclosed on the longer this process takes the longer it will take for housing to bottom. I think the banks would rather carry these bad loans than foreclose them as that would put them out of business losing 50% of the loan value. With 11 months of inventory (the most since 1991) of houses, prices will need to come down substantially before that inventory moves. I think the gov sees this coming and that is why they are taking these drastic counter measures.