Bankruptcy & Foreclosures

Sometimes it’s easy to view the housing lending industry as some faceless entity just waiting for a borrower to slip up so they can swoop down like a bird prey. Surprisingly, most lenders would prefer not to foreclose on a property whose owners displayed a payment history that’s been a little less than perfect.

This becomes easier to understand once we take a moment to review the lending process. Most lenders make the loan then quickly sell it off (as a security) to interested investors. These investment groups aren’t necessarily servicers of the loan (the company receiving your monthly payments). The servicer takes a small cut of your payment as compensation for their time and the leftovers are used to pay the investors.

So what’s that mean? It means that lenders would rather you paid the money back over having to take back the house in question. They literally lose money every minute the property is in their possession. The lender would have to maintain, insure, promote, and then hope to resell the home. Factor into this the fact that housing prices are at an all-time low and it becomes easier to see why lenders would prefer not having to get involved.

The problem is that contacting your lender before your in trouble often results in being transferred over to the collections department whose attitude is typically “save the sob story, we want our money.”

If you have no luck explaining your situation to the lender directly, perhaps it is time to call HUD (1-800-569-4287) in effort to work with a housing counselor who will act as an intermediary between you and the lender.

The US Department of Housing and Urban Development can be reached on the web by clicking here.