Frustrated Homeowners – It’s not the mortgage industry:
Why do many homeowners walk away? I’ve seen most homeowners uncomfortable asking for help. And I believe so many are frustrated and mentally tired that they don’t believe there are favorable solutions to stop a foreclosure.
Most faced with foreclosure haven’t been necessarily overwhelmed by a bad mortgage. While adjustable mortgages have been a problem within the banking industry the past few years, most foreclosures result from bad events happening within a family multiple times within a matter of a few months. Most problems center around loss of income and medical issues along with mechanical breakdowns of items with their homes. These issues leave large amounts of homeowners feeling defeated and unsure where to turn to stop home foreclosure.
These problems are a fact of life in this generation. The results are rising foreclosure rates spurred by unstable economic conditions.
Industry Outlook
Foreclosure has an impact beyond the financial aspect. It has an effect on the quality of neighborhoods and communities with the decrease in owner-occupied properties. The loss in tax dollars can be notable in certain municipalities. As for lenders – the loss is substantial. On the lower side of the scale, lenders lose at least 20 percent on loans that reach foreclosure. And in some cases, their losses reach the 50 percent mark.
Unreasonable Lenders
My philosophy regarding business is about people and relationships. As a banking and financial professional, I believe we need to focus more objectives towards preserving home ownership and reducing the number of defaulting loans throughout the country.
The Federal Reserve and Banking Departments have encouraged lenders to workout plans to help borrowers stop mortgage foreclosure. Unfortunately, I see too many lenders not following this creed to help stop foreclosure. A handful of borrowers are working out favorable resolutions plans, but far many more homeowners are struggling to achieve reasonable resolution with their lenders or servicing companies.
Most of these loss mitigation departments are filled with individuals who possess very little banking experience and aren’t resolution oriented on how to stop foreclosure. I find this very disturbing in the banking industry. These loss mitigation departments are essentially call centers staffed with individuals who are poorly trained and motivated to simply collect a maximum amount of upfront money from the homeowner.
What are reasonable solutions?
I believe lenders must take a more proactive approach towards creating better work flow within their loss mitigation departments. Most of the entry-level employees that homeowners have access towards must become better trained in accessing the current status of their borrowers’ ability to make normal mortgage payments moving forward. Most of these homeowners experience temporary setbacks and can maintain their previous standard of living.
With qualified and experienced counseling, many homeowners can be educated on their options beyond giving their lenders a large lump sum payment and accepting increased monthly payments.
I find it disappointing how lenders can take all the cash a borrower has on hand along with substantially increasing their payments beyond a comfort level. These plans create a lot of anxiety for homeowners. They agree to plans that aren’t realistic because there isn’t enough awareness regarding their options.
I spend a good portion of each day taking phone calls from homeowners who are failing to meet foreclosure resolution plans set by their lenders. My approach with these homeowners is to educate them not only on their options, but establish a reasonable expectation on what they can afford moving forward with their mortgage.
Having this level of credibility representing you is the first step in creating a successful resolution between the lender and borrower to stop a foreclosure. This accomplishes an objective of minimizing losses within a lender’s portfolio, maintains neighborhoods, preserves home ownership for quality families, and allows the borrowers the opportunity to begin a new credit history.
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Brian DeLucia works as a liaison between several lenders and homeowners across the country to establish new processes to stop foreclosure. He can be reached at brian@themaxxisgroup.com.