Foreclosures

[JimG]

otjm, those are all valid points. My point is that if the loan is held by a secondary market entity, the bank may not be in charge of the negotiation, or its options may be limited, or the house, even though nominally held by it, may not really be in its porfolio but its investor’s.

 

[JimG]

Many of these homes were over priced, over mortgaged and the banks knew about this. IMHO those that gave the original mortgage, knowing that the people purchasing the home could never keep up the payments, will have to face God just as we do when the time comes.

Lax underwriting may be a sin, but lately it has also been hedged around by non-discrimination and ECOA considerations, which somewhat limits underwriters. And ‘fair market value’ is what a buyer is willing to pay and a seller will accept. Like the stock market, the housing market sometimes gets into these phases where people are willing to pay too much.

 

[KathleenElsie]

Lax underwriting may be a sin, but lately it has also been hedged around by non-discrimination and ECOA considerations, which somewhat limits underwriters. And ‘fair market value’ is what a buyer is willing to pay and a seller will accept. Like the stock market, the housing market sometimes gets into these phases where people are willing to pay too much.

True. But, there, IMHO, is blame on all sides of this Housing Market and its misery index. I just think that unless the potential foreclosure sale is at a fair market value and not a deflated price then everyone is treated fairly.

 

[bengal_fan]

i think you might be gaining from some one else’s misfortune and even that possibility would keep me from doing it. if i knew of some one facing foreclosure, maybe going to them and offering to take over their mortgage or buy the house for the remaining balance or something like that would be more in line with loving each other rather than sitting back (or stumbling upon) and waiting for the bank to be the bad guy and then getting a deal.

 

[vern_humphrey]

Nevertheless, during the 80’s many people did lose money on homes. Remember the Resolution Trust Corporation? They took over many of the foreclosed homes and loan paper owned by the defunct FSLIC. At one time they had boxes and boxes of pending foreclosures stacked around the walls of temporary offices, just wating to find time to take action on them.

If every home could always be sold for the amount of the mortgage, there should in theory be no foreclosures, since the owners would sell the home for enough to clear the mortgage before it got to that point.

There are times when homes are overpriced, and if you buy then, it will take you a long time to recoup.

But forclosures are usually a result of poor money management on the part of the mortgagee – over-borrowing and over-spending. Even if home prices fall, a person who manages his money carefully can usually come out ahead, simply by waiting out the market.

 

[lizaanne]

i think you might be gaining from some one else’s misfortune and even that possibility would keep me from doing it. if i knew of some one facing foreclosure, maybe going to them and offering to take over their mortgage or buy the house for the remaining balance or something like that would be more in line with loving each other rather than sitting back (or stumbling upon) and waiting for the bank to be the bad guy and then getting a deal.

Why in the world would I want to take over a mortgage that may have been a poor business decision in the first place? If someone was stupid enough to get in over their head and live beyond their means, buying an over priced house in an inflated market, how is it loving for me to bail them out when I have my own family to consider?

The person who lives next door to me is in foreclosure. He is a man in his 60’s who went to live near his daughter. He just decided to walk away from the house because he can’t afford it. He’s still paying rent in his new location, and is in an even bigger and nicer house than the one he left. It was his choice to walk away from his commitment (and yes, I do know the inside circumstances of this situation).

Purchasing a house in foreclosure is not a sin. Living beyond your means is. And that is what has led many of these foreclosures to occur. Not all - but many. And then you have those who just don’t pay their bills at all.

Yes - I know that with the job loss in this area, many people are having to sell their homes. I feel for them, and hope they are able to recover from the loss. But I see no problem buying their home. It may very well be helping them to move into a more manageable situation and thus improving their life if they can get out from under a payment that is too much to handle right now.

~Liza

 

[vern_humphrey]

i think you might be gaining from some one else’s misfortune and even that possibility would keep me from doing it. if i knew of some one facing foreclosure, maybe going to them and offering to take over their mortgage or buy the house for the remaining balance or something like that would be more in line with loving each other rather than sitting back (or stumbling upon) and waiting for the bank to be the bad guy and then getting a deal.

And you think that wouldn’t be taking advantage of them!!

Your way leaves you with the house for less than it would go for if sold at auction and leaves them with nothing at all for their years of mortgage payments!!

 

[otjm]

otjm, those are all valid points. My point is that if the loan is held by a secondary market entity, the bank may not be in charge of the negotiation, or its options may be limited, or the house, even though nominally held by it, may not really be in its porfolio but its investor’s.

In which case, the bank has a fiduciary duty to whomever holds the loan, to reduce the house to cash per the wishes of the holder of the note.

My experience is that a secondary market entity is going to be the one putting it on the market directly, not the originator of the loan.

The bottom line is still reducing the house to cash as soon as is reasonably possible, all factors taken into consideration - market time, current fair market value, costs of carrying, and any other factors that may be relevant.

 

[JimG]

The bottom line is still reducing the house to cash as soon as is reasonably possible,

In most cases, yes. And foreclosure times vary widely by state. Some entities such as HUD or VA, however, may have in place policies which encourage servicers (as well as homeowners) to avoid foreclosure. They may even reward servicers for successfully implementing alternatives to foreclosure. A deed-in-lieu of F/C could put the house on the market more quickly. And in such alternatives as short sales, the claim payout from a guarantor will be less than for a foreclosure, making it a win/win situation. But as you say, each case is different.