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SHOCK! Lenders make more money on foreclosures than short sales!?

OK, I don't pretend to know all there is to know about the current banking situation. I do know that in many cases I smell a great big rat. But putting one's finger on it is a tad more difficult.

In my opinion, the banks took the TARP money, that means they now owe the country that bailed them out something in return. At the very least, their actions should be leaning towards STABILIING the housing market. Instead, some banks seem inclined to make matters worse by CHOOSING foreclosure over loan modification and short sales.

That is not acceptable at all. They took the money, now they are answerable to the American people. We have to hold their feet to the fire.

Via Pacita Dimacali - e-PRO, SRES, CDPE, MBA East Bay, North CA real estate (Gallagher & Lindsey):

Lenders make more money on foreclosures than from short sales or loan modifications. That's what Steve Harney conveyed in a seminar. He caused an earthquake in San Francisco

When loan modifications are turned down, the next thing we attempt is a short sale. And we know that lenders turn over the short sale accounts to loan servicing companies who make our lives hell getting short sales approved. As such, we should know that these loan servicing companies make MORE money by letting the properties foreclose than to approve the short sales OR the loan modification.

RUMBLE...GRUMBLE...CRIES OF DISMAY!

Did he just confirm what we were afraid of?

So I researched this topic and found a few articles worth reviewing. How did I miss these? Was I under a rock in a desert?

CONSUMERLAW.ORG REPORt ON "Why Servicers Foreclose when They Should Modify And Other Puzzles of Servicer Behavior"

DAILY PRESS headline. Oct, 30 2009. Do Mortgage Lenders Make More Money when a Loan Goes iInto Foreclosure?

HUFFINGTON POST. Oct. 21, 2009, Foreclosures Are More Profitable Than Loan Modifications, According To New Report

Washington Post. July 28, 2009. Foreclosures Are Often In Lenders' Best Interest. Numbers Work Against Government Efforts to Help Homeowners.

ThinkGlink. October 21, 2009. Loan Modification Help: Why Lenders Are Slow To Provide Loan Modifications

Dayton Daily News. Oct. 17, 2009. Drop in foreclosures called "very scary". Lender's actions show they think properties are not worth pursuing.

Mortgage101.com. October 23, 2009. Mortgage Companies Make More on Foreclosures Than They Do Modifying Existing Loans. (This blog refers to the news article on Huffington Post)

FLASHBACK: Huffington Post, June 8, 2009. Short Sales: Banks Blocking Way Out of Foreclosure Crisis

FLASHBACK: Huffington Post, May 15, 2009. Short Sales Stories. Lenders tend to stick with more familiar foreclosure process, losing money for everybody.

UPDATE: Huffington Post, November 2, 2009. Homeowners: "Hey Congress, Get Off Your A**"

KNOCKING OURSELVES OUT TRYING TO HELP

So are we engaging in self-flagellation helping our distressed clients with their short sales and loan modification?

Are lenders really more likely to foreclose?

Are the short sale servicing companies really trying to help?

Or are they stalling and withholding their help because they know their leaders would rather have the property burn into foreclosure?

Is there no resolution in signt?

There oughta be a law!

Posted by Ruthmarie Hicks on 11/08/2009 05:39 PM

Comments (3)

Originally posted at: Ruthmarie's Blog: SHOCK! Lenders make more money on foreclosures than short sales!?

3 Comments on SHOCK! Lenders make more money on foreclosures than short sales!?

NOV

Great re-blog. I have been seeing sooooo many blog post on professionals over and over again killing themselves for their clients to have the big banks that get bailed out.... I will stop there. Great insight! Have a great week!

NOV

Hi Dan,

I know what you mean. Every single agent who has been dealing in short sales has said its "awful." The banks simply don't WANT to deal. Period. After reading the comments from the main blog - it seems like the willingness of banks to work with short sales is something of a local one. Katerina Gasset seems to have doing short sales down to a science as well as Bryant Tutas. Lenn Harley also seems to be well versed. I think it behooves us to listen to their experiences and LEARN how to make these work.

We don't have too many in our area, but if the market takes another leg down, we will be hip deep in them.

Ruthmarie

Thanks for the re-blog. I've had some successes with short sales, both on the listing and the buying side -- which is why I am ever so optimistic. So when Harney told the group about this, I was truly in shock (denial may be the better word).

But even the worst bank I'm dealing with on shor sale, Bank of America, has approved short sales but only through 4-5 months of angst.

It is truly frustrating. We try to do this on faith, and hope that the charity of the American people who bailed out these lenders will be rewarded.

Sadly, it doesn't seem to be the case. :-(

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