It’s natural to think that your lender wants your home when they begin contacting you and demanding your past due payments plus additional fees and costs. However, this is rarely the case. Especially in today’s market!
As you’re probably aware, more people are in foreclosure now than at any time in recent history. For instance, CNN reports that even though foreclosure reports declined 10% between October and November 2007, they were still up 68% from this time last year. What would lenders do with all those homes? After all, they’re in the lending business, not the real estate business. They aren’t set up to own or sell real estate and so they lose a lot of money doing it.
For instance, Freddie Mac says a typical foreclosure costs the lender over $60,000! Another report from the Federal Reserve Bank of Chicago places the cost at over $50,000. Whatever the actual cost, though, rest assured it’s much more than it costs them to arrange a workout.
If that’s the case, why are they so persistent in pursuing you and so seemingly unwilling to arrange a workout? It’s because they’re in business to make money for their shareholders. They know a workout will save them money in the long run, but if they can get you to pay everything through being difficult and threatening to take your home, they’ll try it until the last minute.
Rarely, if ever, will they approach a homeowner about a workout. They must contact you about your loan now, but they will try to offer you what is easiest and least costly for them (a repayment plan usually)…you have to prove to them that won’t work and you need something else (a loan modification, short sale, etc). See our blog posts on Workouts to Stay in Your Home and Workouts to Leave Your Home for more info on all your choices.
Once lenders know you truly can’t repay them everything you owe in the way you originally agreed to, they know they have to deal. We’ve found that sometimes you’ll run into lenders that just seem to want to be stubborn, but most will begin to play a negotiating game with you at this point. Most homeowners think the bank has the upper hand so they take whatever the bank offers…even if it’s completly unrealistic. You need to realize that you actually have the power to say no and tell the bank their plan won’t work. If you can prove it to them, they know it’s in their best interest to find a workable solution, but you have to be able to prove it to them using their system and paperwork.
Bottom line…don’t give up your fight to get a solution that works for you financially. If your hardship is resolved and you have the money to pay the payment plan you’re requesting, keep fighting.
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