Thanks for the reply...a little history here...back in the 70's & 80's one could purchase a home that had an existing VA loan on it for less than $200 and the assumption of the debt on the property. The VA had not written their mortgages prior to this time with a clause in them that prohibited their assumption by anyone...for any reason. That's right, anyone with the administrative fee (aless than $200) could "assume" a VA mortgage without first getting a credit check, having a job, or any other "normal" criteria that one would expect to do today (ask an older Realtor). When this became "known", it was abused. Many, many people went out and bought as many properties as they could for rentals just by "assuming" the sellers mortgage. Add to this the ability to cultivate the friendship of a Real Estate Appraisor, and you have a license for fraud. There were many, many cases where someone went out and actually bout 50 or 200 (or more) properties for little or nothing, then had their appraiser friend appraise that property for more than it's worth, and then take that appraisal to the Bank and borrow more money against the property than the property would support. Since Banks used to follow the Fed's examples, many Banks (particularly the Saving & Loans) were also caught up in this same situation. I'm not talking small bucks here...with average house prices back then around $50,000, and property ownership following into major problems (the factories closed...the recession, etc.) you could pick up the family home (once worth $50,000) for $25,000 or less, then refinance it for 70 percent of $50,000 (and many times more) or $35,000...not bad for about 4 days of effort is it? This process eventually led to the Real Estate Debckle of the 80's where all the Saving & Loans went down the tubes. Individuals actuallu went out, bought, then refinanced hundreds (actually thousands) of properties, and then, without a clue as to how to manage them effectively (and in some cases with pre meditation), took the bucks offshore, and then filed bankruptcy on ALL of the mortgages, leaving the Banks, or the Govt. holding the properties. In 1983 (as best I can recall) the Fed changed it's lending policies to reflect the damage it had sustained by changing the VA loan assumption process to requiring any new buyer to undergo a credit check, and an income verification check, and set the rules in place for the 5 loan limit I previosly mentioned on any mortgages they buy from any lending institutions. At this time it also starting requiring lending institutions to have "on deposit in their vaults" a certain amount of funds against which loans could be made. Prior to this time, a lending institution couod be in business with almost "no funds" of it's own! That's right...it could operate completely as a paper entity by writing loans, and then selling that paper to fannie mae or freddie mac. Remember Keating? This new requirement by the Feds is what put so many Saving & Loans out of business. On this next oint I am not absolutely sure, but I believe it was at this time, because of the inability of the Banks to generate enough "holding capital" to stay in business, that the Fed let the Banks start using "judgements against Creditors" that it had obtained as if it were "holding capital". Thus, instead of having a mililion dollars in it's vaults, a million dollars worth of "judgements agains it's creditors" became a viable method of staying in business. If you've ever gotten a judgement against someone yourself, you should realize that for the most part, they are a worthless piece of paper with no use at all to anyone....except a Bank! I'm sitting on about $70,000 worth of them myself and have as of yet ever to receive a dime on any one of them...after 4 lawyers and 5 collection agency's! No-one gets to use a jugement like a Bank does. Back to the timeline. So in the mid 80's, the Banks started NOT holding mortgages they made, but selling them off to Fannie Mae & Freddie Mac...almost entirely. I live in Dayton Ohio, and here, out of all the Savings & Loans (that were still open) and all the Banks, only one had pockets deep enough to loan "investor's money on multiple( read more than 5 per person) properties. Today this situation is different. With the formation of company's that buy mortgages, group them by risk and then sell them on the Stock Market, the "Rule of 5" (still in effect on Govt. purchased securities) has less effect on the average Real Estate Investor. No matter, I agree that the Bank has deeper pockets than I. They trashed my credit rating (initially saying I owed them over $20,000,000 on 7 properties (single or double family homes which I only owed about $200,000 at most on), putting double judgement on my record...they sued and obtained a judgement for first the "entire amount of the mortgage" even though I had been paying them down for years, and then sued again for the difference between what I owed them and what they sold for at public auction. Example, I borrowed $44,000, paid it down to $25,000...they sued for $40,000 got that, then sued again for the difference..ex..I wed $25,000 and the property sold for $10,000 at auction...they sued for an additional $15,000. Let's see, that means the got judgements (something of "value" to them) and got (in my hypothetical scenario) $55,000 worth of judgements for a property that they only loaned out $40,000 on in the first place. Then, as if that isn't enough money for them...THEY BOUGHT THE HOUSES AT AUCTION! That's right, happens every day all of the US. They buy the houses...and exchange no cash for it because they are they ones owed the money on it in the first place, then they sell the house for whatever they paid for it at auction ($10,000 in out hypothetical scenario above) and put hat money "on deposit" along with the judgements. So now they have increased their "coffers" by a total of $65,000. Since Banks make their money by Lending out money, and are able to "borrow money" from the Fed at a rate of $4.. to every $1 they have on deposit, they have increased their lending abilty by 4 X $65,000. Do we see the picture yet? Don't believe what I have said above, please, check it out for yourself. You hear, the Banks don't want your properties, they're in the business of lending money, not owning Real Estate"..and that's true to a point. They are historically terrible "keepers of property" they have reposessed, letting them run down and devaluating other properties in the neighborhoods....but in the late 80's and early 90's (and probably still) loved it. I've rambled enough....L8tr! John
