If a bank re-values a mortgage because it is upside down (the value of the house is less than the principal), should the bank re-value the mortgage when the principal is less than the value of the house? If a person bought a house, it is only worth less if an owner must sell for less.
If a person pays the mortgage on time, and the equity starts to build because of improvements, or better home values in an improved market, then the owner will be happy.
There is something wrong headed about re-valuing mortgages.
I bought a house twenty years ago at top dollar, $73,000. Because of the city it was in, and the possible progression of urban decay, it was later valued by the bank at about $50,000. I was trying to get out of an adjustable rate mortgage into a fixed rate at the time. I had to, and was able to come up with several thousand additional dollars to make it worthwhile for the bank to do this change. At no time was the bank ready to forgive any of the principal.
Some constraints required me to hang on to that property through a severe downturn in the home market. Eighteen years later, the market had turned around-property in that section of the city had become desirable; a few improvements had been made; and the house sold for $95,000. I had excellent use of the property through those years, had a tax and interest deduction on my income tax throughout, made some people happy, and in the end made a small profit.
So, the moral is, hang in, hang on, and relax. Tough times usually yield to better times.
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