A high ranking public official, during the housing crisis said the following re-

Question

A high ranking public official, during the housing crisis said the following re- garding house foreclosures: "If someone is willing to make a call to reach out, there's a chance we can save their house." A bank forecloses on a home when the homeowners fail to pay back their loan. The bank then resells the home to new occupants. a. Do "houses" actually need saving? (i.e., are the houses in jeopardy?) b. When someone has to leave their home because they can no longer afford the payments, that is a tragedy for them. However, if the new owners can make the payments, what happens to the value of the home? In other words, from a social point of view, does the foreclosure and resale of the home increase or decrease social value?

Explanation / Answer

A)No, houses do not actually need saving because even if someone defauksdon the loan payment, it can always be sold off to other people. It is the actual residents of the house who cannot afford to repay the loan that need saving. They require help to be able to settle and foreclose the loan.

B) From a social point of view, there is not much affect on the value of the house since it is independent of the ability of the occupant to repay the loan. Even if the residents fail to repay the loan and house is sold to new occupants, there.is no change in the social value of the house.

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