Sunday, May 24, 2009

Why the Bank Doesn't Want Your House by Karla Jo Helms

An Insider's View of Why It's Best to Work With Your Lender - For You
AND the Bank - When You're in Danger of Losing Your House

Once upon a time, collateral was king when it came to borrowing money.
And your home was typically the crown jewel of your collateral assets.
Home ownership gave you instant credibility to a lender who could
quickly pull up your payment history and deduce from past payment
schedules that, yes, you were a reliable borrower and, even if
something went south - a lost job, a divorce, an illness in the family
- with the house as collateral, the bank would never lose money on
your loan. But now the market is saturated with foreclosed homes,
short sales and defaulted home loans. The value of property in some of
the most saturated areas continues to go down and has yet to hit rock
bottom, leaving both homeowners and bank owners in a precarious
position. According to Robert Sumner, CEO of First National Bank of
Pasco (FNB Pasco) near Tampa, Florida, "Everything is down right now;
not only are we making fewer home loans but we are seeing fewer home
improvement loans as well." Sumner clarifies: "Those who still have
their homes are simply trying to ride out the storm and waiting until
the market goes back up; they don't want to throw 'good money after
bad' by doing costly home improvements if they're not going to get
their value back. Unfortunately, others are losing their homes
altogether." Sumner is referring, of course, to the staggering amount
of foreclosed properties currently flooding the market. And he should
know; Florida features one of the highest numbers of foreclosures in
the country right now. Nationally, according to CNNMoney.com, "More
than 1.5 million homes are seriously delinquent and close to
foreclosure." What's more, a new study finds that "…more than 20% of
U.S. homeowners - about 20 million residences - owe more than their
homes are worth." [Source: CNNMoney.com]

Not wanting to become part of the problem but preferring to remain
part of the solution, now more than ever banks are eager to stay out
of the foreclosure business and do what they do best: banking. In
other words, your bank doesn't want your house. Rather, they'd prefer
to work with you so that you keep the house. Banks don't want your
home for two basic reasons. First, the bank is not in the real estate
business. They don't want to filter precious assets of time, personnel
and energy into inspecting the residence, listing your home, making
concessions or worrying about upkeep. Further, who will mow the lawn
and prune the shrubs once you've foreclosed on the property? Either
the bank spends money to hire someone to do it or lets it alone to
become not only an eyesore to the community but a liability on the
already-competitive housing market. Either way, the bank loses money.
Secondly, when the bank takes over the house the price is drastically
reduced. According to Sumner, "Once the message is out that this is a
'bank-owned' property, both savvy realtors and buyers know that they
suddenly have the upper hand; they know the bank wants to unload this
property and they now have a much stronger bargaining chip. We
typically experience a 30% loss on the value of the property the
minute we assume ownership." What can you do to avoid missing mortgage
payments or, barring that, avoid foreclosure? Sumner lists three
simple steps you can take to work with your lender to avoid your own
financial meltdown: 1.) Reach out before it's too late: If your income
has been affected or your debts have simply snowballed to the point
where paying your mortgage this (or even next) month is looking less
and less likely, don't bury your head in the sand but reach out to
your lender and start communicating with them, sooner rather than
later. They can't help you if they don't know you're in trouble. 2.)
Come prepared: The bank will need information to help you restructure
your payments, refinance the loan or possibly delay a payment or two
to help you with a current situation. Be sure to bring the latest
information on your income, how it's been affected, your current bills
and debt load. Calling the bank beforehand (or visiting its website)
will help you gather a specific list for each vendor. 3.) Prepare for
the worst: Not every bank can help in every situation. Short of
foreclosure, you will still need to pay your mortgage on time and
Sumner warns you shouldn't expect miracles. However, rather than take
over your home the bank would rather work with you, realistically, to
help you avoid foreclosure. Sumner warns there is no simple fix when
budgets are tight and your mortgage continues to be your biggest
expenditure per month. However, he stresses, "avoiding the issue is
never the answer."

About the Author

After handling the PR for an Inc 500 company for several years Karla
Jo Helms was ready to launch out on her own allowing her to bring her
unique take on the world of PR to businesses both large and small.
"Public Relations is a powerful tool that can garner wide acceptance
and delve into arenas that marketing cannot touch," says Karla Jo, PR
Strategist and Published Author.

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