Why don’t banks allow customers that are in danger of defaulting to refinance at a terms they can afford?
While I agree that this mess is of the buyer’s own making, I can’t understand why the banks and mortgage companies won’t allow the people to refi into a loan that they can afford to pay. We all know that banks don’t want houses (non-performing assets) especially in MASSIVE quantities. So why in the world would they refuse to refinace a customer into a new loan that they could afford? Instead of a happy loyal customer paying them in full for the next 30yrs, they end up with a house they didn’t want in a market that’s tough to sell anything in.
Banker’s and mortgage brokers, care to help me out on this one?
Pecola, your answer makes sense. I guess it would depend on how many in a particular package were in default.
rlloydevans, I appreciate your answer and agree with you if it was a fixed rate mortgage. What I’m referring to is ARMs. Why would any lender want a borrower to default on an ARM at 13% interest when the borrower could afford the loan at 7%? I understand that the borrower agreed to the terms of the ARM and should make every effort to pay. I just don’t understand foreclosing (in massive quantities) when a lower interest rate would keep the customer paying for another 25+ years.
You’d think even the investors backing the loans would want that. If the mortgage companies and banks go “belly up”, how does that benefit the investor?
Hollywoodmelody, thanks for the reply, however, you’ve apparently missed the point, too. I come across motivated sellers almost DAILY who could afford their mortgages JUST FINE until they adjusted to nearly double the original rate. Why won’t lenders reconfigure these loans in the cases where it makes sense (borrower has same job, debt load, etc. that they had when the loan originated. Why would a lender want yet another house in a market where foreclosures have skyrocketed and their coffers are flush with non-performing assets? I’m no banking expert but, common sense tells me that a loan paid back at 7% for 25 years is far better than a foreclosed home loan that paid from 5-13% for the first 5 years and pays NOTHING, ZERO, ZIP, ZILCH from now on.
As if that weren’t enough motivation to “work with” their borrowers, now many will have ruined credit, making them worthless as future customers for many many years to come. TY for your responses, but I’m still looking for an answer..
Did you even read the question? How can a foreclosure be more “in their best interest” than a borrower paying a mortgage at 7% for 25 years?