As consumers, it’s not like we have a lot of clout with huge financial institutions. Just remember what it was like when you applied for your mortgage. You probably had to search all over the place for a massive amount of documents that told your entire life story.
Did it feel like you had to sell your soul and bend over backwards to prove that you were worthy?
Well now the shoe is on the other foot. Thanks to this awful economy that we are in, banks are sustaining huge losses. Take a look at a company like Washington Mutual — this is a company that had been around for more than a century, and had weathered all kinds of crises before. But they couldn’t get through this mortgage and credit mess.
Now, most people are running around fretting about what to do. They think the sky is falling, they’re going to lose their home, they’re going to lose their job, they’ll never be able to get credit, etc. Well, guess what?
It’s actually because the economy is so bad right now that we have the banks exactly where we want them. For example, let’s say that you’re finding your mortgage payment is just too much for you to handle right now. Your bank wants to talk to you.
Perhaps you lost your job and you’re not earning as much money as you did when you got your mortgage. Your bank wants to talk to you.
Let’s say you lost your job altogether. Your bank wants to talk to you.
What’s going on? The banks are desperate to keep as many loans as they can in the good pile and want at all costs to avoid having to foreclose on your home. Why? Well, that’s a little bit complicated, but let’s just say that when a bank forecloses on a home the financial hit they take is severe.
What all this means is that through things like a loan modification, homeowners can actually use this crisis to come out ahead. The reason why is because if we go ahead and do the loan modification now, we permanently modify the terms of our loan — we lower the interest rate, we reduce the principle we owe, and more.
Tags: foreclosure