Actually, depending on the reason, I'd negotiate with you to get that back as much as possible. Hence, why smaller regional banks have been more than willing to work with their debtors, than, let's say Bank of America, Countrywide, Chase, etc.
You'd help me only because, as a small lender, that $20,000 actually is materially significant to you and you don't have millions of other outstanding loans. The reality is, that if you were large enough of a lender, you would tell me to eat a dick, foreclose, and find someone else.
The big banks starting working with people, when it became material--just like the small banks did--but it became material to them much sooner.
They don't owe anyone anything.
But really--what were the big banks supposed to do? Open new offices, hire more employees, use more computers, paper, take on more overhead, and the whole 9 yards---shifting their resources of their business into a "lose even more money on the customers costing us money" division? Because, it's not like all this infrustruture is already sitting there in place ready to be shifted.....it's busy being used to do their core activities.
People who are actually close to the debt often realize strictly foreclosing, blind to the facts, find it bad business.
Shocking.
Or more likely they are less diversified. Being a small bank, they only work in their region. If the shit hits the fan in their region, it's not like a bunch of new customers are going to come riding in on a golden horse.
Make no mistake about it, they are only working with people because it creates less of a loss for them--and since they're smaller they are much more scared of losses. It's NOT because they're any "nicer".
They want to grow their market share by seeming nice compared to the big bad bank and play it off like they're the small friendly guy down the corner.
I guarantee that:
1) I wouldn't lend you 20,000$ unless it was a good investment.
Well, then you would have been exposed to the paradox of risk. You would have looked at my past to determine the risk of loaning to me, but the very idea of risk is that the future will be different from what we expect.
This article is about the dollar bubble, but it's the same idea to help you understand if you substitue the words in to apply to banks.
Of course they see it! (Bankers/Buyers) can see what is happening. They wonder about it and shake their heads. It even scares them a little, sending chills down their spine. But they keep (selling mortgages/buying) as though possessed. The greater their doubts, the more greedily they (make loans/cash out on equity). Indeed, that's exactly what is so crazy about these (banks/buyers) and their behavior: The client isn't just a client. (The buyer) creates the security he's purchasing by the very act of purchasing it. If (buyers) were to stop buying (mortgages) tomorrow, suspicion about the (housing values) would spread and insecurity would grow. Then the dream would end. The (values) would start to falter and all the wealth held in (housing properties) would lose its value. Of course, that's not something (banks/buyers) want to see happen.
The only way to fight a weak (housing market) is to strengthen it. Many people no longer care whether the market still justifies the faith people seem to have in it. The new game, which amounts to playing with fire, works exactly the other way around: The (buyers) deserves the faith they gets because otherwise (we lose) that faith. (loans) are bought so they don't have to be sold. The (market) is strong because that's the only thing that can prevent it from growing weak. Reality is ignored because only by ignoring it can the dream come true. Or, to put it still more clearly: Behaving irrationally has become rational behavior.
As long as the faithful outnumber the skeptics, everything works out fine for the (housing market). The trouble starts the day the scale begins to tip.
The process is complicated by the fact that (banks) aren't driven by blind faith alone. In part, it seems, hard facts also push them to extend their credit of trust a little longer. (Housing value growth)-- an impressive figure on paper -- is an important benchmark. When it is high, (banks) feel reassured in their faith in the power of the (buyers) to perform well.
And yet this benchmark is not as reliable as it seems. The faith (banks) have in the figure has actually helped create it. After all, the purchasing price of (more houses) feeds almost directly into state consumption. In this way, the expectations of (banks) -- including the expectation that the United States will continue to grow -- transform into certainties almost all by themselves.
In other words, the capital of trust creates the very growth rates it needs in order to justify itself.
These days, the (home loans) are making a lot of people uncomfortable. One morning many (banks/buyers) will wake up and look at the facts about the (housing market) without their rose-colored glasses --
Greed triumphed over fear for a few years -- but then fear came back.
Much the same fate is in store for the (homebuyers) and for (bank) loans. The (homebuyers) has sold more security than it has to offer. The expectations traded will turn out to be valueless because they can't be met. Just as the New Economy was unable to provide investors with either the growth or the profits that had been predicted for investors, (banks/buyers) will one day have to admit that the (values) backing the (housing market) they sold is weaker than they claimed.
Everything is fine. Until it isn't. Your loans look collectable, until they are not. You look like you'll be able to meet your payments, until you lose your job and cannot.
My belief is that the banks are EQUALLY responsible with the American public. Both sides were greedy and continued to act like there were no consequences.
A drug dealer on a street corner can offer every kind of crazy drug I don't understand imaginable, but if I don't bite and take a hit for a high, I'll be fine. They may be providing it, but I'm accepting it. The drug dealer has no control over me if I stay away from what he's peddling. He or she can only destroy my life if I let them in.
At the end of the day, you both suck. Dealer and Druggie alike.