re: #361 Fat Bastard Vegetarian

The homeowner apparently knew that the appraisal was high (she thought it was high), but went along with it, because it was “free money” to her. Her choice to take the $53,000 was just that - her choice. She could have accepted a smaller amount to pay out. The bank, operating on the appraised value, issued the new mortgage accordingly. The report suggests no wrongdoing on the bank’s part.

So, it isn’t the bank’s fault. The loan doesn’t appear to have been written on bad terms, and the interest rate looks about right.

I don’t think its the government’s fault here; they didn’t force the homeowner to refinance and take out the money; the bank based it on the appraisal at the time; and now everyone is looking to the government to bail them out of a bad business decision (the bank and the borrower). The borrower is now looking to walk away - the money was spent. The bank would get the property and resell at a much lower price, taking a loss.

The only winner here would be the person buying the house at a much more affordable price (about $120k according to the story).