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Are Banks Mistreating People in Foreclosure?

Apr 11, 2008
If you are in foreclosure and have spoken to your bank, you may feel you are being mistreated. This mistreatment comes in the form of not returning calls, short answers on the phone, and advice that may not be in your best interest. The problem is that the bank feels you are in default because of something you did and under the terms of the mortgage, or deed of trust, it is your problem.

This sometimes arrogant attitude permeates the banking industry and makes it difficult for a simple resolution to your foreclosure. This is sometimes why homeowners believe that banks want to steal their homes, especially when there is equity in them.

Actually the bank does want to get the equity out of your home if there is any. In the recent real estate market declines, this is not very often the case. The sub-prime crisis has caused the demise of many banks that were uncooperative with borrowers who were sold homes they couldn;t afford by using Adjustable Rate Mortgages ("ARM's").

The bigger issue is that the banks have to deal with so many people who have so many stories that they have become numb to the homeowners' personal situations. More importantly, the banks are in business to make a profit, so unfortunately that means helping foreclosure victims is only secondary to what is in their best interest.

The banks make money from both interest differential on their loans, also on the points charged at closing, or the selling of their loans for a profit. How many people do you know who have had their lender changed after they got their mortgage? The number is very high because there is a great deal of money to be made in selling and repackaging these small loans into multi-billion dollar bundles.

If a bank has to take a property back from a foreclosure or a "deed in lieu of foreclosure" it becomes a Real Estate Owned ("REO") property for the bank. This is a problem because of the huge jump in the cash reserves the bank must have by Federal Reserve requirements.

So generally speaking, the banks don't want your home unless they can quickly sell it and make a profit. As soon as a homeowner is 90 days late the banks use computer programs to determine if your home has equity and they even send out a realtor to do a Broker's Price Opinion ("BPO") to determine its value. If it has equity that the bank believes makes it quickly salable, you may be treated differently than a homeowner that has no equity.

This "equity stripping" of the home is not a predictable source of revenue for the bank, but when it becomes available, the bank has an "obligation to its stockholders" to take advantage of the situation. In the southeastern states and California, this was a common practice for years when there were rapidly rising markets.

Some banks have become pro-active in trying to help homeowners by sending out field reps to review their personal situation and offer solutions. However, the programs we have seen required the lender's agent to be a licensed realtor which caused a conflict with his wanting to list the property for the higher commission versus the small fee for having the homeowner fill out a form and getting a solution from the bank that allowed the homeowner to keep his home.

In summary, the bank has motives to mistreat the homeowner. Most banks are not in the business to try and steal homes from foreclosure victims but if the opportunity avails itself, it is a real possibility. Banks will not give homeowners legal advice especially if it is not in their best interests.

Therefore, the homeowner must be aware of what questions to ask his bank regarding what programs are available as solutions for his foreclosure problem. Never sign any documents either from a bank or anyone else without getting the documents reviewed by an attorney.
About the Author
Dave Dinkel is the author of the best selling "32 Ways to Quickly Stop Foreclosure" and has helped thousands of foreclosure victims for nearly 33 years If you are facing foreclosure, visit

click here for guaranteed
solutions.
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