Buyer A pays $100,000 and puts NOTHING down and gets a loan for $100,000.
Buyer B pays the identical house next door for $100,000 but puts down '$50,000 and gets a loan for $50,000.
Both houses are now worth $60,000.
Buyer A is under water.
Buyer B still has some equity.
Who gets their mortgage reduced?
Buyer B actually lost lots of his hard earned money. Buyer A lost NOTHING!
Who gets the loan reduction?
The answers saying basically that the bank is stupid or corrupt are wrong!
To answer your question let me ask you a question, would you rather have $200,000 cash in your hands or a promise to pay the $200,000 back over 25 years from a borrower who already has not made payments? The answer is obvious. I would take the cash and run, wouldn't you?
All lenders have learned a great moral in the past from their experiences that "Bird one hand is greater than two in the bush". If the home owner is willing to pay all cash for the reduced principal mortgage, all the lenders would be happy to do so as they can save little efforts and money from paying the commission to Realtor. But how many owners are willing to do that? As you know that we(Human Beings) are all wanting animals so given a chance we would like take every opportunity. What is the guarantee that the owner further not ask for the any reduction and pay with out fail his/her mortgages regularly? That is the reason, Banks/Lenders would prefer short sale and get out of the current situation. It is like now or never.
Paul Reddy, ABRÂ®, BPOR, CHS, SFR, SRESÂ®
DRE # 01876403
(408) 230 2009
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
Over 80% of the loans out there are owned by fannie or freddie. The ones that arent owned have been sold so many times they cant even find the correct investors.
I think a lot of owners dont know if the banks dont have the original note, then i know there have been lawsuits where they cant foreclose.
I do videos everyday on my site how short sales turn into foreclosures, and why? I even sent a tweet to REALTOR magazine to expose this problem.
Now, its a catch 22 no fannie, market tanks, with fannie, taxpayers take on risk, while big banks make money on loan interest. Whos the real winner?
If you were lender: would you rather receive $300000 cash now or $300000 mortgage that may or may not be paid back?
I think the answer is obvious take the cash and move on.
Many if not most loan mods do not result in a good long term outcome.
Private Investors and/or the Government Own the Loans and they have to Profit.
Why do you think you can't get an answer from Banks.
A reduction is like saying "Oh we will let you cheat us out of $40,000.00 and stay in the house" I don't think so
Until then, may I ask you who is going to eat that bill (I mean the differences)? Let say, I refi cashed out a few years ago when the market was up. Now, I say market is down and you (banks and its investors) to take it. Is that fair?
Second, banks has to write up loss somewhere and short sale is a perfect way for them to do that. They start fresh with new owner on papers.
Third, who has the most gold than they make rules. It has always been like that in the past and will be in the future. Wall Street will make a call who, what and when they want to do that or not.
Have a nice evening.