Why Banks Foreclose instead of modifying a mortgage.
Upon obtaining financing from a bank it’s not all smooth sailing ahead if you are not educated about the whole process. You also need to take the necessary precautions and measures to understand why most banks/lenders are quick to foreclose your property; rather than offer a modification on your mortgage.
Research has verified times and times again that banks do prefer a foreclosure rather than modifying your mortgage. There are quite a few reasons that are beneficial to them of course. Now why would a bank want this instead? Well there are countless reasons why but here are some solid reasons to think about. If you are a homeowner who is worried about a possible foreclosure, continue reading!
- Banks love to make money, it’s what they do! – Yes this is one of the top reasons why a bank/lender is so quick to take you down the road to foreclosure. They prefer your home rather than allowing you to make up for all those payments. Some lenders won’t even give you extra time on your mortgage. Simply put, they love making money, it’s what they do.
Over the years, the history of the banks have always been very daunting for homeowners. Primarily because they become fearful once they miss a payment. This is when the banks call or mail asking about what happened. The banks will constantly remind you about your payments but their priority is not to see you get that home mortgage cleared off. They want to win, at all cost and in order to win, they must get the payments on time and in full. They will even sell the house and profit quickly so they are quick to take it to foreclosure.
- The current economy will likely cause you to default – Most homeowners often tend to have a belief that the current economy will likely turn around. This would then mean that their home would be worth what they paid for it or even more as time progresses. Unfortunately, that’s not the case. Due to this kind of thinking most homeowners are often caught up and eventually miss their payments. Later on they are left to default to a foreclosure.
- The bank staff has the wrong approach- Because banks are often short staff, there are times when there is not enough knowledge or training given to the staff. As a result, they either give the wrong information to a customer or do not handle their request as they should have.
A lot of cases show where banks could have given a loan modification. However, due to the inexperience and aim of the employee to foreclose the property they miss the point. Eventually the homeowner does not get the relevant information to help them out of their situation. Technically the staff approach the situation incorrectly and as harsh as it might sound; homeowners are always left to suffer in the end.
- The deadly insurance policy- Another aspect that can help borrowers to be more aware of the situation that they are getting in is to: keep in mind that when banks provide you with insurance policies. They always ensure that they are on the most advantageous side of the court.
Consequently, whatever great rates you are introduced to as a borrower. Always be aware of the fact that those said policies allow the banks to be protected to a maximum degree. Only a small fraction of homeowners are likely to get a modification on their mortgage. That’s if they are determined enough and use the right avenues. The aid of an attorney or counselor who is experienced in the field can also be promising.
Applying is the easy part. How you position yourself will determine if the bank/lender will want to grant you a modification on your loan. They might also want to quickly bring down your property and all that you have worked so hard far at that point to a foreclosure.
How can you tell what the bank or your lender will do?
Firstly there is no guarantee of which step a bank will take but just bare in mind that if push comes to shove, they are likely to go down the foreclosure route. They rather this instead of a modification which would be in favor of you. Banks lend money so that they can make money and that should always be a point taken as a borrower.
In addition, most often than not, customers find themselves frustrated and unsatisfied sometimes. Mostly when they come across bank staff who literally don’t know how to help them. Other than the list of rules that they were given to follow that’s about it. In other words, most mortgage holders will come across bank staff who are often limited in the skills area.
Mortgage holders only find themselves being handled by more capable bank staff when their issue is a little more unique than the general problems. Unfortunately a bank will usually opt to foreclose. The fact is, modification does not allow for maximum advantages while foreclosure costs are usually paid by the mortgage insurer.
As it relates to foreclosures, banks therefore choose the option where they would lose the least. This then leaves all burdens to be borne by the borrower. The truth is that banks make more money if they decide to foreclose a home instead of making modifications.
There have been several initiatives aimed at helping to put borrowers in a better position. However, many of these initiatives have failed because of one particular reason. The impression was given that lenders would benefit more if modifications were made instead of foreclosures. This couldn’t really be much farther from the truth.
As mentioned earlier, banks do prefer foreclosures than actually modifying your loan. Mainly because they initially gave you the mortgage to make some money from you. We could even say a lot of money because banks do make a huge lump from all those mortgage rates that homeowners repay. Furthermore there is someone who applies for a mortgage everyday. Thus there is a never ending scheme that they have put in place.
Do not get things twisted as we are not talking down any lender or bank here. Since most homeowners could not have achieved their properties without the use of a mortgage; it can be a huge head start but it’s how you go about handling your finances and disciplining yourself that counts in the end despite the harsh reality that banks prefer foreclosures than loan modifications.
