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Facing Foreclosure? Your Bank Is Partly Responsbile For Impoverishing Your Neighborhood
Author : Nick Adama
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Homeowners often are not aware of some of the most important aspects of foreclosure, including how they can get help, the fact that they are not alone, and how much a foreclosure will really cost the bank, the owners themselves, and the county government where the property is located. The process by which lenders were able to offload liability onto insurance companies and other parties has resulted in huge costs to communities across the country.
Private mortgage insurance, for instance, is paid by homeowners, but it allows the bank to recover from 30-50% of the losses on a mortgage foreclosure. Thus, the borrowers, though a portion of their unaffordable monthly payment, insure the lender against loss in case the loan goes into default.
There are three types of servicers in a typical mortgage -- the master servicer, the subservicer, and a special servicer. While most homeowners are aware of their servicing company (it is the one force placing insurance on their homes and claiming never to receive faxed negotiation paperwork), few realize that there may be two more companies involved in the servicing of the mortgage. And this does not take into account all of the other trustees, owners, trusts, investors, attorneys, and government agencies that may be involved in any mortgage tranasaction or foreclosure.
One of the main reasons banks turned to securitization of home loans was to protect investors, lenders, servicers, and everyone else from the liability of the loan originator. The idea was, if no one owned the toxic, predatory mortgage, then no one could be held legally liable if the courts decided the loan violated laws or standards or ethics. But the idea has backfired in that hiding the loan in hundreds of different hands means no one owns the loan or has the legal standing to sue for foreclosure. The more homeowners that take advantage of the poor record-keeping of the banks, the more will be able to keep their homes based on the confusion of no one actually owning the note.
The players involved in a typical securitization: lender, seller or wholesale lender, issuer or depositor or Special Purpose Vehicle, servicing company, trustee, custodian, underwriter, ratings agency, insurer, warehouse lender or facility. And this may not even be a chain that goes from one to the other. Trustees may change hands, servicing companies will sell off rights to one another, the insurer of the loan may change or go out of business, and ratings agencies may downgrade the quality of the debt these loans are based on.
The website for the Center for Responsible Lending has reported that 60% of refinance mortgages during the boom were subprime. This means that a majority of the loans originated during the real estate bubble years may have numerous servicers, and numerous companies that are involved in the securitization process that have touched a single note. Homeowners may wish to take advantage of this knowledge to do some research and find out which company really owns their mortgage.
When a property goes into foreclosure, there can be enormous costs to deal with the foreclosure process, and then with the maintenance of an abandoned home after the foreclosure is over. Homeowners, banks, and local governments all have a price to pay, in terms of direct costs and lost revenues. Average estimated costs per foreclosure:
$7,200 in costs to the borrower for administrative fees
$20,000 to local government for taxes, utilities, water, sewer, maintenance and upkeep
1% drop in property values within 1/8 mile radius of foreclosed home
Thus, even neighbors in an area in which foreclosure rates are high will be faced with lower property values and a declining standard of government services. Of course, in areas where property taxes are already too high, this may be a net positive for remaining homeowners, but in areas with extremely high numbers of foreclosure, neighborhoods can turn into ghost towns fairly quickly.
Author's Resource Box
To find out more about how foreclosure works, visit Nicks website, which provides services to homeowners trying to save their homes. Foreclosure refinancing, deed in lieu, loan modification, and short sale assistance can be found, as well as info on preventing a foreclosure before the sheriff sale. You can read more about how to save your home while there is still time and find the site on the web here: http://www.foreclosurefish.net/
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Articlebliss
Tags: foreclosure, private mortgage insurance, homeowners, bank, mortgage foreclosure, securitization, home loan, originator, lender, refinance mortgage
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Submitted : 2009-08-05 Word Count : 825 Popularity: 214 Times Viewed: 21
