| First of all, why does the bank have the right to take | | | | making any new loans. That completely dries up their |
| your home? They do because the house was set up | | | | stream of income. It is obvious that a bank will do |
| as the security (the thing of value) to "protect" the | | | | almost anything to avoid these two consequences of |
| bank from losing the money that they have lent you. | | | | "taking back a house". |
| That being said- the bank really does not want your | | | | Another internal motivator that discourages a bank |
| home. What they want is the interest on the money | | | | from taking your home is the cost of the foreclosure |
| they loaned you. Owning property is counter | | | | process. It costs a bank an average of $50,000 in "in |
| productive to the way banks make money. Owning | | | | house" costs, attorney's fees and agent's |
| property costs them money, it doesn't make them | | | | commissions, just to bring a house to the court |
| money. Think about it, the property doesn't pay | | | | house steps, for an auction. Additionally the vast |
| them any money, people do. All the bank is trying to | | | | majority of homes at auction are not being |
| do by "taking" a home back, is to cover their losses | | | | purchased by investors. This is because the starting |
| on a loan in default. | | | | bid (or what is owed on the first mortgage + fees) |
| Owning property hurts the bank in other, more | | | | is not a good enough bargain. The real estate market |
| severe ways than just being an unwanted expense | | | | everywhere has slowed to the point that investors |
| or a non-performing asset to them. Banks must | | | | need a really low price to make a purchase worth |
| report the amount of REO's or Real Estate Owned | | | | while to them. |
| property, (these are homes that have gone through | | | | As stated before, homes not purchased at auction |
| the foreclosure process, and have been to auction, | | | | become the REO's that hurt the bank. With the vast |
| and no one has bought them, and now the bank is | | | | majority of these homes going back to the bank, this |
| stuck with them) to the Federal Reserve. | | | | puts the banks in a very uncomfortable position. This |
| The 1st slap on the wrist that "The Fed" will impose | | | | is to the advantage of those willing to go to the |
| is charging a bank with too many REO's, a higher | | | | work to negotiate with the bank. The bottom line to |
| interest rate on the money they borrow to lend to | | | | this whole explanation is that knowing all this should |
| customers. At this point, the offending bank cannot | | | | give you some hope and some leverage in dealing |
| compete effectively with other lenders who borrow | | | | with the bank. After all knowledge is power. |
| their money at the lower rate. The next step "The | | | | Try to stop foreclosure! You can avoid foreclosure! |
| Fed" will take if the balance of REO's remains out of | | | | There are options! |
| compliance, is, that they will restrict the bank from | | | | |