Banks Getting Better At Processing Foreclosures
Behind every cloud there is a silver lining, and this one is a bit obscure.
The cost of procession a foreclosure for lending companies went down by $10,000 in the past 2 years. A new report says that the cost of processing a foreclosed upon property is down to $50,000 instead of the reported $60,000 to sell a foreclosure.
A recent Congressional Research Service paper, which analyzes current foreclosure issues, highlights how substantial and far-reaching these losses can be.
1 While losses can vary widely, several independent studies find them to be generally quite significant: over $50,000 per foreclosed home 2. or as much as 30 to 60 percent of the outstanding loan balance. via NGO.ORG
With the amount of foreclosures that have hit the market in the past couple of years you would think some efficiencies have entered the system. However, this is still a huge cost to the banking and financial industries. For a bank to foreclose on a home they are recognizing they are taking a very specific and expensive hit to their balance sheet.
If you are facing foreclosure and reading this article I am not telling you to play hardball with the lender. They are a bureaucracy and it is not the person you are talking to’s money. However, if you are close to saving the home or have a chance to get current, be persistent. The banks are in the business of money so they will listen to any reason how they can make more money. If you can show them that not foreclosing on you is in their best interests then you may end up saving your house.
Hat tip to Matthew Rathbun (@mattrathun) and Jason Sandquist (@jasonsandquist) for finding this paper.
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Comment by Portland Real Estate on 12 October 2009:
Well I would certainly hope that they are getting better at it! They are sooooo slooow. You would think that with this many homes to take care of they would get some sort of streamlined digital system to take care of everything, but apparently not.
-Tyler
Pingback by Housing News: 10/13/09 « AccuriZ on 13 October 2009:
[...] Banks Getting Better at Processing Foreclosures [...]
Pingback by The Battle in Loan Modification « AccuriZ on 13 October 2009:
[...] with loan-mods with the Administration issuing progress reports periodically. Also, news of banks getting better at processing foreclosures is the silver lining in an otherwise dark [...]
Comment by Matthew Rathbun on 13 October 2009:
I am stuck thinking that Lenders still have little incentive to approve the Short Sale and less incentive to pay sufficient staff to handle the Short Sale requests.
I’d really like to see an independent study of the corporate processes of the major lenders. Someone needs to give recommendations of how to make the system more efficient.
Comment by Tom Royce on 13 October 2009:
I think you are right at how the mortgage companies are handling short sales. The banks are corporations and thus are bureaucratic enterprises. Making the decision on a short sale is a decision to intentionally lose money and opposed to slowly leaking money. To an entrepreneur making the move quickly makes sense, but the banker tends to wait just in case something better comes along.
If the banks board of directors created incentives for the feet on the ground to make fast, tough decision the process would be better for all parties.