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Old 06-14-2012, 11:48 AM
 
Location: 92037
4,630 posts, read 10,270,138 times
Reputation: 1955

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This caught my eye and found it pretty interesting. It might offer some insight for potential homebuyers and some of the frustration with homes on the market that are not traditional sales.
Some of you may already know that most mortgages are not actually owned by the bank or lending instituation. They are owned by hedge funds or Fannie/Freddie and the bank simply services those loans on the front end.

Per the article:
Big banks don't own the majority of their loans. Investors like Fannie Mae, Freddie Mac, big hedge funds and etc. own loan portfolios and banks service the loans. If the loan is not in default, the bank charges the investor $25 a month for servicing. They send a payment coupon and process the payment. If the bank has a million loans, then multiply $25 by 1 million. That's not bad, right?

Now... if the loan goes into default, the bank transfers the loan from servicing department to collections department. It includes calling the borrower 10 times a day, sending letters and doing other things to collect the payment. When the loan is in collection department, the price for servicing goes up to $300 per month. Multiply $300 by a million and you will see why banks postpone foreclosures as much as they can.


Insider's View of Why Banks Postpone Foreclosures - La Jolla, CA Patch
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Old 06-14-2012, 12:02 PM
 
Location: La Mesa Aka The Table
9,820 posts, read 11,534,907 times
Reputation: 11900
Wow!
No comments?
Great Post
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Old 06-14-2012, 12:05 PM
 
148 posts, read 279,418 times
Reputation: 134
this blog entry was written by Alexandra Germon, Short Sale Expert, Real Estate Expert, Real Estate Investments and Flips Expert

uh huh
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Old 06-14-2012, 12:48 PM
 
Location: San Diego via Orange County via Toronto via Rome Italy
390 posts, read 794,847 times
Reputation: 382
I don't get it. It says the PRICE for servicing jumps to $300/month - doesn't saying "price" imply that the cost gets passed on to the investor? If anything, you'd think banks would be trying to get to default as quickly as possible to start collecting that $300 . . . .
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Old 06-14-2012, 01:06 PM
 
Location: 92037
4,630 posts, read 10,270,138 times
Reputation: 1955
Quote:
Originally Posted by sschibuola View Post
I don't get it. It says the PRICE for servicing jumps to $300/month - doesn't saying "price" imply that the cost gets passed on to the investor? If anything, you'd think banks would be trying to get to default as quickly as possible to start collecting that $300 . . . .
Nope. Because they are the front end 'servicer' to the investor. The servicer is actually making money by having a loan going into collection @$300/mo vs the $25/mo when its not in default.
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Old 06-14-2012, 03:46 PM
 
Location: San Diego via Orange County via Toronto via Rome Italy
390 posts, read 794,847 times
Reputation: 382
Ahhh . . . light-bulb goes off . . . I missed a step there. It's Normal/non-default -> Default -> Foreclosure. So banks want to move to Default ASAP, but then drag their feet before Foreclosure since it's really not their capital that's at-risk, and they get the $300 for a few more months.

Brilliant. Who says capitalism isn't alive and well? Whiners, that's who . . .
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Old 06-16-2012, 09:12 AM
 
Location: East Fallowfield, PA
2,299 posts, read 4,824,429 times
Reputation: 1176
Holy Crap! Did not realize the difference in the amount of money between servicing and default. Great post!
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