Your Mortgage Company Loses $50,000 to $60,000 If They Foreclose on You
When it comes to foreclosures most of our focus is on the person facing foreclosure. We look at the impact the foreclosure may have on them and their family. You may not realize it but mortgage companies and investors are also affected.
Most people think that when a mortgage company acquires a home through a foreclosure, they make out. They turn around, sell the home and come out way ahead.
Let me tell you that is not true. I have seen several different reports which indicate that a mortgage company loses between $50,000 and $60,000 on every foreclosed home that they sell.
How does that happen? Remember – a mortgage company’s primary business is to loan money. They do not want to sell real estate. When they acquire a foreclosed home, they have to sell it. At the present time it is taking about 10 to 12 months to sell a home in most parts of the country.
Because it is a foreclosed home, the price at which it is listed for sale will normally be lower than similar homes around it. The reason is simple. The longer it takes to sell the more it costs the mortgage company. They have to pay the taxes, insurance and utilities. So the mortgage company will offer it at a lower sale price to try to sell it more quickly.
When a foreclosed home is listed, everyone knows that it is a foreclosure. Most people believe that they can get it for a steal. Potential buyers will offer far less than the current list price on it. The mortgage company is afraid that if they turn down an offer, it may be a long time before they get another one. So they are more inclined to accept far less for the home.
The money the mortgage company loses is the difference between the balance of the mortgage at the time of foreclosure and the net amount they get from the sale. In addition to this they also have their own administrative costs while the foreclosure process was going on.
So if you do the math, you can see quickly how much a mortgage company can lose. They lose between $1,000,000 and $1,200,000 on every 20 homes they acquire through foreclosure. Not a small amount during this foreclosure crisis.
Every time a person facing foreclosure is able to reach agreement with their mortgage company on a modification to their mortgage which will enable them to save their home, the company does not lose as much money. Favorable loan modifications benefit the mortgage company as much as they do the person experiencing financial hardship.
If you are facing foreclosure, remember this. If the foreclosure goes through and your mortgage company gets your home, it is going to cost them between $50,000 and $60,000. Use that in your negotiations with them. Get a modification which will lower your monthly mortgage payment that you can make without difficulty. Get help with this from a lawyer or an expert in loan modifications.
Much Success,
Mark Elkins
