Banks Decline to Take Foreclosures
March 30, 2009 by Miranda Marquit
Filed under Finance
One of the concerns that many homeowners have is how to stop foreclosure. In some real estate markets, however, this may not be much of an issue. In some of the hardest hit areas of the country, banks are declining to take foreclosures.
Banks, loan servicers and others are taking a complete loss and walking away. It’s the latest development in the ongoing mortgage market crisis saga. Homeowners aren’t the only people deciding that it is more financially feasible to just walk away than to try and salvage the property; banks are deciding the same thing now. And that can cause more trouble for already-troubled homeowners.
The New York Times reports on this growing trend amongst mortgage lenders:
Guy Cecala, publisher of Inside Mortgage Finance, an industry newsletter, said some properties had become such liabilities for investors that it was not even worth holding on to them to strip valuable fixtures, like kitchen appliances, toilets and hardware.
“The whole purpose of foreclosure is to take title of the property, sell it and recoup what money you can,” Mr. Cecala said. “It’s just a sign of the times that things are so bad no one wants to take possession of the property.”
Most of the real estate that banks are walking away from, however, are properties at the bottom of the market. These are homes that were not worth a great deal to the banks at the outset of the mortgage loans – homes in the $50,000 to $160,000 range before the housing market crisis hit.
It’s a new twist, and one that could result in confusion and even bigger hassles for homeowners. Many homeowners assume that once foreclosure proceedings start, things are over if they can’t make up the back payments. However, if the bank walks away without letting the homeowner know, he or she could be surprised down the road with more paperwork, expenses and hassles. After all, if the bank refuses to take over the title, you are required to maintain the property — even if you aren’t sure what is going on.
image source: Brendel via Wikipedia
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Check out what others are saying about this post...[...] The idea behind a foreclosure is that, when it becomes evident to the bank that the borrower will likely completely default, the bank takes over ownership of the home and then tries to auction it off in order to recoup some of the losses. A regular foreclosure can mean losing between 50% and 60% on average. However, with the housing market so bleak in some areas, that loss is mounting. Banks are thinking that — in some cases — it’s not worth it to take over ownership. After intitiating the foreclosure process, some banks are just…walking away. [...]