I don't get why banks foreclose

[SuperBowlNachos]

I hear of people's houses getting foreclosed on then being turned around and sold for sometimes $1.

I don't get why the bank wouldn't rather refinance and have money flowing in even if a small amount each month rather then sitting on a empty house.

[Trevytrev11]

Re: I don't get why banks foreclose

I hear of people's houses getting foreclosed on then being turned around and sold for sometimes $1.

I don't get why the bank wouldn't rather refinance and have money flowing in even if a small amount each month rather then sitting on a empty house.

A lot of the time, the people can't afford the payment regardless.

Someone gets a 5 year ARM with an affordable monthly payment and a low rate. Over the course of a few years, the rate goes up and up and all of a sudden the $1K house payment is now $3K, but the house that was worth $500K is now worth $350.

The banks not going to keep offering the new Interest Only/ARM mortgages every year to get the rate to what the person can afford. The owner can't afford a fixed rate payment, which is probably double what the original ARM payment was worth. Rates creep up and they can no longer offer a loan that the person can afford. He may have got an interest only loan and when rates rose, he was in over his head.

So now the guy is upside down on the loan. No bank is going to loan him $500K to pay off the original loan with a house for collateral that is now only worth $350K. The assets need to equal the amount of the money being loaned or close enough to it that the bank feels comfortable that they have something worth the vaule of the loan in the event of a default.

The bottom line is people were taking loans that they (both knowingly and unknowingly) could not fully afford and the banks were knowingly giving them out.

Banks are limited on the rates they can offer. They can't just change the rate of the loan to fit the customer. So if you can't make the payments at 10%, they can't just give you a 2% loan.

[av7]

Re: I don't get why banks foreclose

I hear of people's houses getting foreclosed on then being turned around and sold for sometimes $1.

I don't get why the bank wouldn't rather refinance and have money flowing in even if a small amount each month rather then sitting on a empty house.

I'm sure banks do but most of the people getting foreclosed cant pay it and stopped all together.

A neighbor here got foreclosed and has to move out in January but had they actually made even 50% of their payment the bank would have dealt with them- instead the house is being sold below market price and their already bad credit line gets hit.

[Knight165]

Re: I don't get why banks foreclose

If people knew banks would not foreclose....what would keep them paying their mortgage?
If I told them I could just afford to pay 400 a month...they are supposed to say.."that's better than nothing?"
They need the leverage.

M.K.
Knight165

[av7]

Re: I don't get why banks foreclose

If people knew banks would not foreclose....what would keep them paying their mortgage?
If I told them I could just afford to pay 400 a month...they are supposed to say.."that's better than nothing?"
They need the leverage.

M.K.
Knight165

The people next door could've made payments, even though it wasn't the entire su. It would've helped them in the long run. Instead, they stopped paying the house payments and went to sporting events, bought a new car, new boat. Their bank would have worked with them had they made an effort in payments, now they're screwed.

Now what sucks, because of them everyone else trying to sell their house against foreclosures has it tough, foreclosures being sold for a $100K discount

[RoyalBoyle78]

Re: I don't get why banks foreclose

Banks are evil empires like the Yankees, thats why I'm old school. I keep my money underneath my mattress.