The Real Estate Crisis Ain't Over
February 15, 2010 09:57 Filed in: Real Estate
If the attitude I’ve seen from the big mortgage lenders is any indication, they’re running scared. A tsunami of residential foreclosures lies ahead.
I regularly deal with clients who need to get out from under their mortgages for one reason or another. I had thought, about a year and a half ago, that mortgage lenders would be glad to hear me offer a simple deed-in-lieu-of-foreclosure (DILOF) since, in theory at least, it should avoid many lender expenses of regular foreclosure. My client hands the lender a deed, and the lender discharges my client from the loan without the threat of personal liability. No foreclosure process, little legal expense, and little waste to the property (where homeowners trash the property on their way out).
The fact is, every big mortgage lender I've dealt with has stonewalled me in this process. At first, I thought, oh, they're just sort of out to lunch and not processing things very well. But after a half dozen "lost" faxes and constant revision to the "right" fax number or department, it is abundantly clear to me that the lenders are trying to halt DILOF's. There are just too many bad loans for the lenders to cope with.
With foreclosures, the lenders must be able to control the timing of when they take their losses so that their balance sheets aren't totally wrecked. When DILOF offers come in, that adds another loss that the lender hadn't figured on. The lender would rather time a foreclosure a few months down the road, when perhaps things will get somewhat better.
That's all I can figure. It's impossible to get the lenders to talk about DILOF's, so if they are so economically advantageous, there must be powerful incentives to avoid them.
The fact is, every big mortgage lender I've dealt with has stonewalled me in this process. At first, I thought, oh, they're just sort of out to lunch and not processing things very well. But after a half dozen "lost" faxes and constant revision to the "right" fax number or department, it is abundantly clear to me that the lenders are trying to halt DILOF's. There are just too many bad loans for the lenders to cope with.
With foreclosures, the lenders must be able to control the timing of when they take their losses so that their balance sheets aren't totally wrecked. When DILOF offers come in, that adds another loss that the lender hadn't figured on. The lender would rather time a foreclosure a few months down the road, when perhaps things will get somewhat better.
That's all I can figure. It's impossible to get the lenders to talk about DILOF's, so if they are so economically advantageous, there must be powerful incentives to avoid them.