Do Lenders Really Want to Foreclose?

Despite the widespread belief that lenders are like birds of prey, waiting to swoop down and foreclose as soon as they see the chance, I don’t believe that is the case.

Waves of foreclosures hit for many reasons, but they did not go on the rise because the banks developed a hankering for real estate. People could no longer afford their payments. Investors with multiple properties found themselves at the wrong end of the market. But banks did not conspire to take homes.

I am not saying banks are without fault. They made bad loan decisions. They were stunningly ill-prepared for the onslaught of distress. But as things have settled down, more and more people are being offered workable solutions that will keep them in their home.

The first 10 to 15 years on a 30 year loan is primarily interest. Foreclosing on a home, then, cuts off the stream of profit. It doesn’t seem to make sense that a bank would prefer a piece of brick or mortar instead of an income stream. Especially when you consider that once they own the home, there is upkeep while they attempt to sell the home. They pay to keep homes cool in Florida, or bug free in the woods. The selling process is costing them money as well, in agent fees, commissions and buyer incentives. It makes far more sense to structure a way for the owner to keep the home, or to cut their losses and allow a short sale. In both instances, they get the cash they want, without having to handle the physical property.

I do not work for a bank, and I have not sat in on any backroom board meetings. But I know common sense, and I have seen more banks working hard to find creative ways to allow people to either short sell or stay in their homes.  Which, to be honest,  just makes sense for everyone.

Regina Brassil, REALTOR. The comments made in this blog are strictly the opinion of the author.

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