Every day I hear from Homeowners "Why won't the bank reduce the principal owed on my home rather than selling it to a complete stranger for less money at a foreclosure sale."
Here are some possible reasons:
1. It is easier to say "No" than to work with the homeowner. Loan Servicers work for mortgage companies, and are responsible for collecting the monthly mortgage payments and remitting them to the mortgage company after deducting their fees for the services provided. Servicers are paid extra if they have to start a foreclosure against an homeowner. Servicers also provide other services that they can charge the mortgage company. Such services may include doing due diligence on the borrowers, title work, process service work, storage of documents, etc. etc. all of which is billed to the mortgage company. Therefore, the Loan Servicer has absolutely no interest in working with the homeowner until the entire relationship between the Servicer and the Mortgage Company and how the Servicer makes its money is changed.
2.There is no benefit for the Lender to reduce the principal. It is better to get less now through a foreclosure sale than allow the homeowner to pay a reduced amount over the next 30 years. Remember money is more valuable today. The same money is worth much less 30 years from now. Plus when the home is sold at a foreclosure sale, the bank can get a deficiency judgment against the homeowner for the balance of the mortgage. These deficiency Judgments can be sold for a price. There are various ways to avoid a deficiency Judgment.
3. Even if the bank reduces the principal and/or the interest rate or extend the loan for a longer time, banks know that given the state of the economy, many homeowners will default. I have got loan modifications for many of my Clients, and at least half of them have already defaulted and are seeking another Loan Modification. Of course, I am consumer lawyer, and my job is to protect the little person, so I apply shamelessly for a second, and a third modification, and aggressively defend the foreclosure case.
4. Banks have become so big that the right does not know what the left is doing. It is almost impossible to get the same person on the phone two times in a row. And the ones we speak to do have the authority to do anything but to gather papers. And for some reason banks keep asking for the same papers again and again. It is frustrating. Many times the Customer Service departments are outsourced to countries like India or China, etc. and it is a big mess. Most of the staff does not have the training to get things done.
5. Many mortgages are insured by AIG or another insurance company. Why will the bank work with you and give you a loan modification or reduce the principal when it knows that if it foreclosed on the home, they will get 100% of their money back from Insurance.
Moral of the story: It is better to foreclose than to do a loan modification or reduction in principal.
Attorney Dsouza defends foreclosure lawsuit, negotiates loan modification, deed in lieu of foreclosure, defends credit card lawsuits, negotiates and settles debts. www.DsouzaLegal.com
Here are some possible reasons:
1. It is easier to say "No" than to work with the homeowner. Loan Servicers work for mortgage companies, and are responsible for collecting the monthly mortgage payments and remitting them to the mortgage company after deducting their fees for the services provided. Servicers are paid extra if they have to start a foreclosure against an homeowner. Servicers also provide other services that they can charge the mortgage company. Such services may include doing due diligence on the borrowers, title work, process service work, storage of documents, etc. etc. all of which is billed to the mortgage company. Therefore, the Loan Servicer has absolutely no interest in working with the homeowner until the entire relationship between the Servicer and the Mortgage Company and how the Servicer makes its money is changed.
2.There is no benefit for the Lender to reduce the principal. It is better to get less now through a foreclosure sale than allow the homeowner to pay a reduced amount over the next 30 years. Remember money is more valuable today. The same money is worth much less 30 years from now. Plus when the home is sold at a foreclosure sale, the bank can get a deficiency judgment against the homeowner for the balance of the mortgage. These deficiency Judgments can be sold for a price. There are various ways to avoid a deficiency Judgment.
3. Even if the bank reduces the principal and/or the interest rate or extend the loan for a longer time, banks know that given the state of the economy, many homeowners will default. I have got loan modifications for many of my Clients, and at least half of them have already defaulted and are seeking another Loan Modification. Of course, I am consumer lawyer, and my job is to protect the little person, so I apply shamelessly for a second, and a third modification, and aggressively defend the foreclosure case.
4. Banks have become so big that the right does not know what the left is doing. It is almost impossible to get the same person on the phone two times in a row. And the ones we speak to do have the authority to do anything but to gather papers. And for some reason banks keep asking for the same papers again and again. It is frustrating. Many times the Customer Service departments are outsourced to countries like India or China, etc. and it is a big mess. Most of the staff does not have the training to get things done.
5. Many mortgages are insured by AIG or another insurance company. Why will the bank work with you and give you a loan modification or reduce the principal when it knows that if it foreclosed on the home, they will get 100% of their money back from Insurance.
Moral of the story: It is better to foreclose than to do a loan modification or reduction in principal.
Attorney Dsouza defends foreclosure lawsuit, negotiates loan modification, deed in lieu of foreclosure, defends credit card lawsuits, negotiates and settles debts. www.DsouzaLegal.com
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