mortgage.
Why would the lender do that? Because lenders usually don’t like carrying foreclosed houses on their inventory. Taking repossession of your house is an unwanted and expensive problem for the lender. Lending institutions don’t make their money on foreclosures. They’re in business to leverage funds and earn interest on assets. Even if the money the lender receives from a short sale is less than what you owe on the mortgage, the amount might be more attractive to the lender than what they could get by allowing the property to end up in a foreclosure auction. The lender might opt for the “bird in the hand” amount of the short sale, as there’s no way to be sure how much a buyer would pay at auction. A lender’s losses on foreclosed homes can range from 20 cents to 60 cents per dollar, with a single loss being as much as $50,000, according to TowerGroup’s consumer lending division, cited in the Mortgage Banking magazine. To the lender, repossession often means taking on responsibility for a home’s maintenance and utilities while preparing to resell it. Lenders must secure the home against possible mold, insect infestation, and vandals. (A vacant home is an invitation to crime.) They must keep the lawns trimmed to comply with local ordinances. In cold-weather parts of the country, they must keep the heat on to prevent plumbing from freezing. They must advertise the home when they’re ready to sell it and provide access to potential buyers. The lender might have to pay a property management company to handle these maintenance chores. If the repossessed house needs repairs, the lender must choose whether to hire subcontractors — electricians, plumbers, carpenters, painters, drywall specialists, glazers, flooring installers, tile setters, etc. —
59
Powered by FlippingBook