Banks in Real Estate?

The thought has crossed my mind lately that the Mortgage Meltdown should eliminate big banks wanting to get into the real estate business. The old adage "clean around your own door step before you start cleaning around mine" is apropos. Although it appears the majority of the mortgage issues were brought about by unscrupulous mortgage brokers, the buck does not stop there. Florida was the first major problem area and that may have been fueled by speculators creating the tremendous rise in home prices. Other culprits were the politicians who, wanting to get the vote of that segment of people who could not afford a home, declared everyone should have the right to home ownership. They do have that right already. Governments then created programs to allow assistance with buyer down payments and or closing costs, which resulted in the sellers increasing the home price to cover what he would have to pay to the buyer to sell the home.

Those homeowners then maybe only stayed a year or two years and expected to sell the home for a profit, when that home had not appreciated to include the costs added on to the sales price. Some appraisers participated by appraising generously. Realtors found a lucrative market by selling homes to those buyers. And it goes on and one and on. No one did anything illegal, in fact it was sanctioned, but it ended up creating a problem for the home owner and home values.

There is a program in Greenville, SC (city) where nice homes are built and sold at reasonable prices and if the buyer needs down payment assistance, can qualify if they meet certain income/prior homeownership criteria. If they sell the home within the first 5 years, the profit is shared with the developer as he made a lower profit in order for this to work for people who wanted to buy, but could not afford to buy. The City development group, in conjunction with the developer/builder manages the criteria and provides some of the assistance through funds for that purpose. This sounds like a very fair way to assist people who need help to become homeowners. (This is the general idea, not all of the specifics)

Ultimately, all this should keep lending institutions busy enough for awhile that they may not be so anxious to be in the Real Estate business by having their own Real Estate Brokerages, under the control of the lending institution. It will certainly be interesting to see how this plays out.