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First Portfolio Services LLC
Why would the bank agree to a loan modification of your note? #1 reason……Banks do not want to foreclose on your property!!!!!!!!!!!!!! ”The first myth about foreclosure that everyone should know is that banks do not like to take houses back from the people that could not pay for them. In fact, most banks will do everything to help a homeowner get back on track or sell property before they have to foreclose on the property. Banks are not in the business of selling homes, so they will do everything they can to keep from doing that. Banks are in the business of loaning money and they will go above and beyond loaning money to keep from owning your property. Homeowners can benefit from knowing that their bank doesn’t want to foreclose on them…” http://EzineArticles.com Banks do not want to foreclose on your home because it will cost them more in the long run. We will work your bank to insure that you can stay in your home. An affordable payment for the homeowner which allows the bank to continue to make a profit is the win-win situation we are striving for. Here is a common situation – Audrey is a single mother who bought her home with 100% financing in 2006 for $200,000. The home has dropped in value 20% from the purchase. She had a 2 year ARM that has now adjusted pushing her payment up over $2,000 a month (PITI). Mary has run through her savings and if she can not reduce her payment she will most certainly lose the home. On the left is what it will cost the bank to foreclose: on the right is what it will cost the bank to do a note modification. |
| Bank Cost to Foreclose New home value $160,000. Mary owes $200,000. The bank is already $40,000 underwater but it does not stop there. The bank will have to pay attorneys fees of $4,000 (an est.) to do the foreclosure and they will not receive interest payments from the time the bank foreclose on the property to to the time they sell it. (6 months at $1,500 a month est.) $9,000. Now, the bank is out $13,000 even before they get the home. But remember the home is $40,000 upside down and that is if the bank can get full value of the home on its sheriff sale. In our current market the bank might have to discount the home up to 30% to get the sale. This means the bank might sell the home for 70% its current value. (or $112,00) This puts the bank out a total of $101,000. $13,000 before they sell the home then $88,000 on the sale. The bank loses $101,000. |
| Bank Cost to do a Note Modification The lender has invested money, time and people power to get the Note Modification done. They will lose $101,000 if they foreclose but if Mary was to stay in the home for the entire loan term of the new note (40 years at 7% interest) she would pay the bank a total of $477,259.41. Subtract the $50,000 loss and the banks $160,000 original investment and the bank would still make $267,259.41. Let me say that again….The bank will make $267,259.41. |