There’s a dirty little secret your banker doesn’t want you to know about how to stop foreclosure. It’s a secret that keeps him up at night. He tosses and turns, beats his pillow, and stares at the ceiling, while the same thought keeps circling his mind. He wrings his hands, eats antacids, slurps coffee, and stumbles over his words in morning meetings with upper management.
The big secret? Your banker does not want to foreclose! He wants you to stop foreclosure and stay in your home. It may feel like the bank does not want to work with you or that they don’t care, but make no mistake: They definitely do care about you staying in your home.
Your Bank Is A Business
The bank is in business to make money. The way they make their money is by lending money. When you took out a loan for your home, your lender gave you a mortgage that in return makes money for themselves and for their shareholders. Your lender wants to stop foreclosure, not pursue it. When your payments stop, your bank stops making money on your loan. Your mortgage becomes a non-performing asset, or NPA. An NPA quickly becomes an expense that your bank doesn’t want. Foreclosure costs lenders thousands of dollars in expense and time, and they don’t want that headache.
Threat of foreclosure is the only option that the bank has to persuade you to pay your mortgage. The bank hires collection experts who try their very best to frighten you into paying your loan payments.
Your Home Becomes A Non-Performing Asset
Once the bank initiates foreclosure, the regulations that govern the banking industry require that the property be reported as NPA. Once this takes place, your home becomes a liability to the bank. The NPA designation affects the bank’s ability to borrow money, as well as hurting their overall credit rating.
Banks must have adequate funds in their cash reserves to meet short-term and emergency funding scenarios. If their NPA levels exceed a certain level, it hinders the bank’s ability to lend money. This becomes a huge issue since a lender is in business to lend money.
Most banks will try any means necessary to prevent a property from becoming an NPA, hence, they will often delay initiating foreclosure for six months, and even up to a year in some cases in order to avoid adding an NPA to their rolls.
Reasons Banks Want To Stop Foreclosure
Once the bank initiates foreclosure, the administrative and legal battle nightmares begin. They have to pay an agency to make collection attempts. If those are unsuccessful, they will eventually take your home to auction, incurring more expenses and possibly not earning back the money that was initially lent for the property or any of the expenses spent to bring the loan current. Sometimes, the bank can’t even sell the house at auction. They’re not in the property management business, and they don’t want your home.
It’s easier and cheaper if the bank can persuade you to pay your mortgage! To recap a few reasons the bank wants you to keep your home:
- It’s far more expensive for the bank to foreclose on your home
- The bank can’t make money on NPA’s
- They have to pay collection agents to hound you for your payment
- They may not sell your home if it goes to auction
- They’re not property managers
Additionally, empty homes do not make good neighborhoods. Entire blocks become decimated when empty homes start popping up. This affects everyone who lives in the neighborhood as it affects property values and resident safety.
What You Can Do
We’ve previously discussed foreclosure options available to you here: http://www.propertyconversionsllc.com/eugene/behind-on-your-mortgage-get-back-on-track/ and here: http://www.propertyconversionsllc.com/blog/worried-losing-home-prevent-foreclosure/ and here: http://www.propertyconversionsllc.com/lanecounty/lane-county-housing-market-can-help/.
If you missed them, go back and study up on the options available to you to stop foreclosure. When you’re ready to talk to your bank, come prepared with facts and be sincere. Knowing that your banker wants you to keep your home puts you in a position to negotiate for a reinstatement, a modification, or a short sale.
Stop foreclosure. Call your bank today to work out a plan to keep your home.