A Rush To Foreclose: Five Really Good Reasons Why Your Mortgage Company Doesn’t Love You Anymore

A Rush To Foreclose: Five Really Good Reasons Why Your Mortgage Company Doesn’t Love You Anymore

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We’re all hearing about a lot of issues that people are having with their lenders or mortgage loan servicing companies. The way they won’t return calls, and won’t help with home loan modifications, short sales, or payment programs specifically made to help keep home foreclosures from happening. It’s almost as if the banks want you to default on your loan.

So where’s the love, man? And exactly why do the banks and home loan servicers seem to detest us so? Well, there are actually some good reasons that the bankers are in an awful frame of mind at the moment, and I’ve written five of them down below for your enjoyment.

Reason 1: Because You’re a Deadbeat!

“But!”, you assert “I’m not a deadbeat! I’m paying my mortgage on time! I simply need some assistance because of unusual circumstances.” You and I know that there are a large group of men and women out there who could keep their homes if given a bit of assistance, however, many bankers and loan servicing providers don’t see you this way. This is due to the fact that right after they issued you your loan, they bundled your house loan up with thousands of other loans in a comparable risk grouping, and then sold that investment (called a CDO) piecemeal to numerous investors. As soon as enough of the other homeowners in that CDO stopped paying their mortgage, the entire investment went bad, and those CDO speculators returned angry at the bank that sold them the CDO. And now, despite the fact that the government purchased back many of those CDO’s in order to save the banks, they still consider you less than a payment away from non-payment, even if you possess a spotless payment record.

Furthermore, the underwriting requirements to get a mortgage prior to the sub-prime turmoil were so lax in comparison to now that your bank now views you as under qualified for the mortgage you have. In other words, they view nearly all note holders as not being worthy of his or her mortgage. It doesn’t matter if it was initially their error to give applicants mortgages based on a written declaration on yearly income alone (“liar loans”), banks currently see everyone as under qualified.

Reason 2: Because The Judges Let Them.

The areas most affected by the sub-prime turmoil have been overwhelmed by home foreclosures. Florida is one such instance. Their legal courts have recently been so overwhelmed by foreclosure trials that they had to call judges back from retirement to officiate in special “express” courtrooms created to be able to plow through as many cases in a given day as they possibly can. In these situations, it is next to impossible for any judge to have the time needed to determine the difference between a homeowner lying to save his or her home, and one with an actual claim to a full trial, rather than a summary judgment favoring the loan servicing company.

These kinds of conditions make it extremely simple for any banks or loan servicers who choose to fudge things a bit in their favor by trying to bend the rules on paperwork. And it also offers almost no incentive for banks and home loan companies to settle out of court with home loan modifications or short sales once they know that the judges are siding with them.

Reason 3: Because Mortgage Adjustments and Short-Sales Are Making Them Lose Money.

When the banks set up these monstrous investments consisting of thousands of houses each, little to no allowence was made in the investments themselves for issues such as mortgage loan adjustments and short sales. The buyers of such investments would have never bought them if they knew the banks could have taken the income from the investment to zero by making repayment deals with individual homeowners, so the loan companies that are servicing them are required to pay the owners of the CDO without changes. Yes, our government bought many of those CDO’s when their default rates proceeded to go toxic, nonetheless servicers are still contractually required to pay the revenue streams from the remaining loans inside them to the government.

Therefore, if your mortgage was wrapped up into one of these Frankenstein investment packages along with 10,000 other loans, and your bank gives you a home loan modification then they have to pay the difference, or the”ll have defaulted on their accountability as the servicer. But these investments were originally offered for sale with an expected foreclosure rate, together with a secondary type of insurance policy (known as a CDS) that was meant to take up the slack if foreclosures became seriously bad. So if you go into default, then the loan servicer only has to execute the foreclosure and then give any proceeds from that to the investment holding company.

Giving you a second chance with your mortgage will frequently cost your loan company money. However, foreclosing on your property could generate them some money in procedural charges. And so, it’s frequently in the bank’s optimum interest to try to make it as difficult as possible for anyone to obtain a short sale or loan adjustment. In numerous cases, the mortgage servicing companies won’t even have an ownership stake in the homes that they are servicing anymore, which guides us to our next couple of reasons you’re not feeling the love from your lender.

Reason 4: Because They don’t Want to Have to Argue With Some Other Company Over Your Property.

“What?”, you say. “Exactly why might lenders be fighting with each other over my home?” Yet again, it’s because of all of those giant investments that the financial institutions made by bundling up thousands of home loans with each other. You see, the financial firms just didn’t market these items to a sole client. Instead, they divided up the income streams by grouping borrower risk levels and through isolating the interest payments from the loan principle installments. So technically, there usually are multiple interests upon each property within the CDO. On top of that, there have been instances where the ownership of houses in the CDO (the physical tranches) was promised to several parties.

Quite a few banking institutions and home loan firms are fighting savegely today to foreclose on as many properties that they can in a gambit to get your property’s value well before the wolves can get a peice of it. So this time around, the big bad wolf can really blow your house down.

Reason 5: More Than Any Other Reason, They Don’t Love You Because They’re Scared of You.

Which brings us to the real heart of the issue, and that is paperwork. When a house’s mortgage is bought or sold, a paper known as an assignment is legally required to correctly transfer the right to foreclose on that house. Anyone attempting to foreclose on a house needs to possess that assignment (along with several other court required papers) to be able to have standing in the courtroom as a claimant for the house in question. On the other hand, somewhere among the bank loan servicers, the enormous trusts who kept the physical assets of the CDO’s, but who didn’t want to hold the mortgage notes for tax reasons, and a third party registry known as MERS which had been assumed to be taking care of the paperwork, yet wasn’t, no one did the legal note assignments. As a consequence of this the legal paperwork trail for the legal right to foreclose on a great many of the home loans in the United States is now nearly impossible to demonstrate to courtroom standards. In many instances, that mortgage note assignment trail died with several of the hedge funds and trusts that went out of business during the sub-prime bust.

So what exactly have those lenders and note servicers been doing when they can’t legitimately prove that they have the right to foreclose on a particular house? Evidently, they’ve been “reworking” the documents and slipping them past those overstressed judges. But now that they’ve been caught with their hands in the legal cookie jar, they really don’t want people to learn about it, much more than only in the sence of “we made a mistake”, and “we’re fixing it”, because if you did know, you might realize that it’s not only the recent home foreclosures that happen to be in doubt. A huge number of the current mortgages out there might legally be nullified as possessing no standing in the courts in the event that the house owner paying their mortgage loan went to court and forced those banks and mortgage holding companies to confirm their standing.

The simplest and most effective tactic for the loan company is to push a homeowner to give up their claim by foreclosing on them as quickly as they can. And then with luck, the now displaced homeowner will simply move on without asking anymore questions as to the legality of their bank’s standing in court.

So right now, it’s in your lender’s or home loan servicer’s best interest to keep you afraid of them. Which is why there’s no love there.

Copyright 2010, by The Rogue Economist. I personally invite you to come over to my blog,

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A Rush To Foreclose: Five Really Good Reasons Why Your Mortgage Company Doesn’t Love You Anymore