Borrowers Walk Away From Home, (Foreclosure, Short Sale, Credit Crisis)

Here are a few things banks/lenders can do that would dramatically decrease the number of people who walk away from their home.

But First

Back in March I wrote "File this one under...You Really Need to Grow Up (you couldn't pay your mortgage, the bank foreclosed...leave with some dignity)" In it I posted a video I found on wsj.com.

The video was a report on borrowers, who are being foreclosed on, that destroy the home before leaving.

[Disclaimer - this should go without saying (but some people are idiots so I'll say it anyway) vandalism is wrong and those who engage in it should be prosecuted to the fullest extent of the law]

Now...where were we? Oh yeah...Banks are finding that more and more people are beginning to walk away from their mortgage (click here to find stories) and let the foreclosure happen. This is a huge change from the past. Some have said it's because the borrower never had any "skin in the game". In other words the bought the home with no money down. In part, that may be true...however, I don't by any means think it is the whole truth.

Banks Should Do a Better Job

Everyday in our industry we speak with borrowers who are in trouble. The number one problem we hear is that the bank isn't working with them. They are difficult to contact and when you do contact them they are difficult to deal with and when you do try and deal with them they are slow to make decisions. In the meantime the borrower, who's already dealing with a world of emotional stress, is growing weary.

Not that it justifies the actions of some borrowers, but one can easily see why they react the way they do in these situations.

The banks would do themselves a favor (and save a bunch of money) if they

• Give them someone to talk to - No one likes being bounced around from department to department from one voice mail hell to another.
  
• Became more customer oriented - yes I know they aren't paying the mtg, but look it's easier to get something and have a great reputation then get nothing and be trashed. Momma always said..."honey is better than vinegar"
  
• Streamline the process - Why does it take weeks and in some cases months to make a decision? More people would take advantage of the short sale process if it wasn't so cumbersome. Face it...the faster you sell these things the faster the market recovers.
  

Dear Bank - I would be happy to consult with you and help you implement these ideas. I could guarantee that you would have...

• Fewer Short Sales - We'd give the person on the phone the ability to extend the mtg, freeze the adjustment, something, anything to keep these people paying.
  
• Even Fewer Foreclosures - sure you'd lose money on the short sale but not nearly as much as you lose on the foreclosure.
  
• A Better Reputation
  

Give me a call and we will discuss my terms and commission structure.

Technorati Tags: Credit, Foreclosure, Banks

Got a question for Scott? Feel free to call him directly at 360.216.1762