Why Is Renegotiating Your Mortgage With Your Bank Is So Hard?
If you are like nearly 3 million other homeowners in the country you have gotten a foreclosure notice from your home lender this year. It costs the banks nearly $60,000 to process a foreclosure that goes to repossession so the lender typically takes a beating in the process. So why do they make it so hard to renegotiate?
Here is an explanation from CNBC:
But the main problem is that so many mortgages have been grouped together into securities and sold off to investors worldwide. These mortgage-backed securities typically carry terms that severely limit the homeowner’s ability to renegotiate a mortgage.
So the banks that typically service the mortgage—collecting payments from homeowners and passing them on to the investors—risk being sued if they deviate from these terms. And those servicing the loans often make more money in foreclosures than in renegotiating a loan, giving them even less incentive to help out homeowners. via CNBC.com
So banks are fighting an issue we all have to fight, doing a good deed takes a great deal more work. To save the bank and the lenders money, there are difficult hurdles that need to be cleared. Finding out who has packaged the loan. Negotiating with them and the homeowner. Determining if it will save the bank money in the long term. All why the bank employee is absolutely overwhelmed with work as they are seeing more foreclosures than ever before.
So if you have a mortgage held by local bank and you are facing foreclosure, you have a much better chance of getting a sympathetic ear to discuss a renegotiation with. If you have a loan that has been sold a couple of times and securitized, then the chances of working out a deal is much more difficult.
That is why banks are having a hard time working out short sales or reworking the mortgages, so many of the factors are beyond their ability to cope with right now that it is easier to lose money.
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Comment by Tony Sena on 1 November 2008:
It is very discouraging for homeowners who are trying to sell their home as a short sale and they can’t get the banks to give answers. I don’t know how many times we have had offers and it takes the banks 2-3 months to get back with an answer. You can’t expect buyers to wait around that long!!!
Comment by Tony Sena on 1 November 2008:
In addition I have had several short sales in the last 2 weeks get offers and I have left messages and still have not received a return phone call from the lender? The banks should either make a decision to either get short sales done in a timely manner or flat out not accept short sales!
Comment by Property Qwest Blog - Real Estate News and Housing Data on 3 November 2008:
Hi Tom,
Well said. There’s much going on behind the scenes that people don’t see and many of those, even us paying attention to these matters on a day to day basis, don’t fully understand.
The loan mess and the endless bundling is a perfect example of the complexities.
Again, thank you for your thoughts.
Comment by Bill on 21 September 2009:
Know two folks going through this right now. They are beyond frustrated and stomping mad. Hope to see the day soon where the system gets smoothed out. Nice post…thanks.
Comment by Jane on 27 October 2009:
I have been trying to get the bank that holds my mortgage to modify my loan since last spring. Each time I complete all of the necessary paperwork, I get a letter that says I am missing documents. Often I am missing the exact items that I sent in. Of course it takes over a month to get any response from the bank with each new packet I send in. It is impossible to connect with a real, English speaking person on the phone and their website requires an id and password which you can not get without opening a savings account. Is it time to contact a lawyer?