Great Post by Lenn Harley. She makes some very good points. It is unfortunate the way the system is set up now....I had not thought about some of these issues in the say that Len worded it...thank you Lenn.
WHY MANY BANKS ENCOURAGE THE HOME OWNER TO DEFAULT BEFORE THE HOME OWNER CAN APPLY FOR A SHORT SALE OR LOAN MODIFICATION??
An interesting comment on a member's blog post about a class action lawsuit and the bank's requirement that the home owner first DEFAULT, see, "Big Bad Banks". . . . .
Comment: "I find it hard to believe that the lender really actually encouraged a default."
HA! I find it hard to believe that an ActiveRain member could possibly doubt that a bank would "encourage a default".
MANY banks not only encourage default, they require it!
The writer stated further, "They [the bank] more likely just stated the guidelines as they are." (emphasis added).
What guidelines???? It is perhaps possible that some loan officers have not been exposed to real live home owners who have never been late with a mortgage payment, now have had a serious loss of income and are living on savings or the kindness of family to make that mortgage payment every month. Or, perhaps they've never spoken to the thousands of home owners who have the adjustables that are now 2-4% higher than 3-5 years ago when they anticipated refinancing their home but find the mortgage mess and concomitant financial disaster and destruction of the housing industry has stripped them of their equity making refinance impossible. Those home owners still have unblemished credit and are in need of a modification to reduce their mortgage payment to something that will preserve their home.
However, the first requirement from their bank or servicer is, "YOU MUST BE 90 DAYS IN ARREARS BEFORE WE'LL CONSIDER MODIFICATION OF YOUR LOAN".
IN THAT ONE STEP, THE BANK HAS REQUIRED THAT THE HOME OWNER:
- Destroy their good credit.
- Limit their options.
- Lose any negotiation position.
- Limit their ability to rent.
- Jeopardize their ability to secure new employment.
- Increase their cost of credit for many years.
Perhaps loan officers don't get these calls, but I get those calls every single week. Some have been referred for Short Sale, in which case, they lose their home. Some have been referred to a good attorney for modification, then they learn that the bank really has no interest. Of course, the bank does communicate with the attorney, which is more than the bank often did with the home owner. The first clue of the bank's intention should be that any discussion about modification is usually handled by the bank's "LOSS MITIGATION" department. If memory serves correct, LOSS MITIGATION is the same department that handles FORECLOSURES. Is it possible that the mindset of the bank begins with circumstances that will eventually result in FORECLOSURE???
Of course, once the home owner has defaulted, the boot of the bank is on their throat and they accept that disgusting "modification" which takes the arrears, adds it to the mortgage balance along with very exorbitant fees and penalties and leaves the home owner in worse shape than when they did what all the experts advise, "CONTACT YOUR MORTGAGE COMPANY". No wonder so many default after modification. Clearly, that is the mideset of many banks and servicers.
Mortgage Modification is just another word for "ANOTHER DAY OLDER and DEEPER IN DEBT".
THE BANKS, HOWEVER, ARE NOT ONLY SOLVENT, MANY ARE FLUSH WITH CASH. The sheer number of owners in distress has no influence on the actions of the banks. They don't care because they have nothing to lose when a property is foreclosed. The government has devised so many ways to protect their interests and profits, they are inured to the damage to the financial health of our country.
YES, IN MANY CASES, THE BANKS DO REQUIRE THAT HOME OWNERS FIRST DEFAULT, THEN TRY TO GET HELP.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.
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