Foreclosures: The Lender’s View

by on General

For some time now, people have been discussing the effects of the large inventory of bank foreclosures on the overall market condition, the national economy and on the earnings of real estate buyers and investors. What people failed to look at closely are their effects on lenders.

You would not believe this, but given the chance, lenders would not pursue foreclosure proceedings. Aside from the considerable foreclosure costs involved including legal fees, many lenders would rather have the loan settled, even if it takes a long time.

For many lenders, foreclosure may be an effective way to force a homeowner to deal with his mortgage payments. But as much as possible, lenders do not try to take this costly route. If the owners come to them to negotiate payment terms, they would certainly welcome their offers. They consider this a better way to recover their money instead of demanding payment from owners who have no means of paying their mortgage debt based on the existing terms.

In some ways, lenders have realized the major role they played during the housing boom that resulted in more than one million foreclosure homes in 2006. Many of their colleagues engaged in predatory lending practices and approved loan applications filed by borrowers with poor credit rating. Unfortunately, these lenders did not consider that these borrowers can not afford to pay the mortgage debt in the first place and could end up facing foreclosure sooner or later.

On the other hand, lenders who have a large inventory of bank foreclosure properties often find themselves losing much on holding costs. Most of them work with foreclosure brokers like Bank Foreclosures Sale in order to attract much needed buyers and reduce number of bank foreclosures. In the United States, there is already a growing number of lenders who have seeked bankruptcy protection due to the overwhelming inventory of real estate foreclosures.