Comments on: Banks Don’t Want Foreclosures; Borrowers Refuse Help http://daily.freecapitalist.com/2008/04/banks-dont-want-foreclosures-borrowers-refuse-help-2/27 Scintillating, Daily News Items by the FreeCapitalist Project Tue, 06 Jan 2009 12:34:48 +0000 http://wordpress.org/?v=2.7 hourly 1 By: David Kirby http://daily.freecapitalist.com/2008/04/banks-dont-want-foreclosures-borrowers-refuse-help-2/27/comment-page-1#comment-12 David Kirby Mon, 28 Apr 2008 17:26:16 +0000 http://fcd.freecapitalist.com/?p=74#comment-12 I completely agree with the stance of the Article “Banks Don’t Want Foreclosures: Borrowers refuse help.” I worked for 7 years in both the private and public sectors for three of our nation’s largest financials institutions. It is a well known fact that it is not in the best interest of any lending institution to foreclose on properties in which they have leveraged. Why would a lender want an asset back that is paying them a monthly cash flow? The reason is that unless the loan is a portfolio product of the lender, most likely the lender sold and/or borrowed the money from Fanny Mae or Freddie Mac to fund your loan. What? It is not the banks money that funded my loan? This is correct. Many times banks sell and/or borrower the underlining financing to fund your loan unless it is one of the banks portfolio products that is unique to them (i.e. Washington Mutual’s Option Arm). Most large lenders maintain the service of the notes, but sell and/or borrow the note to Fanny Mae or Freddie Mac. This is common on most traditional lending products. When you review your lending disclosures with any lender you can read how often they buy and sell notes on the lenders servicing agreements. It is broken down by percentages. Why is this important to know as a borrower? This is crucial to know as a borrower because now you gain leverage over the lender. Your lender is most likely the middle man in the transaction and where you have been accounting to them, they in turn have been accounting to another funding source. You are the one paying the payment to them and taking care of their asset. They want you in the house. You are the asset in the equation. They have to pay the piper too and if it is not Fanny Mae or Freddie Mac it is their share holders and depositors. Banks will generally loan 4 to 1 on deposit to loan ratios. This means for every $1 million of deposits the bank is willing to loan out $250,000. As a borrower you can use this to your advantage. Banks will generally leverage their deposit portfolio for their unique lending portfolio products. If the bank is in a position in which they would have to foreclose on a portfolio loan their deposit base is now at risk and their ability to do loans in the future is at risk. As a borrower you want to know this information. Most of the time we are afraid of the lender and just want to hide under a rock because we are late on our payments and worried that our house will be yanked out from underneath us. First of all the foreclosure process takes 6-9 months. However, work with the banks. They generally have as much self interest in the property as you do. Remember you are the asset that has secured the physical property securing the loan. I completely agree with the stance of the Article “Banks Don’t Want Foreclosures: Borrowers refuse help.” I worked for 7 years in both the private and public sectors for three of our nation’s largest financials institutions. It is a well known fact that it is not in the best interest of any lending institution to foreclose on properties in which they have leveraged. Why would a lender want an asset back that is paying them a monthly cash flow?

The reason is that unless the loan is a portfolio product of the lender, most likely the lender sold and/or borrowed the money from Fanny Mae or Freddie Mac to fund your loan. What? It is not the banks money that funded my loan? This is correct. Many times banks sell and/or borrower the underlining financing to fund your loan unless it is one of the banks portfolio products that is unique to them (i.e. Washington Mutual’s Option Arm). Most large lenders maintain the service of the notes, but sell and/or borrow the note to Fanny Mae or Freddie Mac. This is common on most traditional lending products. When you review your lending disclosures with any lender you can read how often they buy and sell notes on the lenders servicing agreements. It is broken down by percentages.

Why is this important to know as a borrower? This is crucial to know as a borrower because now you gain leverage over the lender. Your lender is most likely the middle man in the transaction and where you have been accounting to them, they in turn have been accounting to another funding source. You are the one paying the payment to them and taking care of their asset. They want you in the house. You are the asset in the equation. They have to pay the piper too and if it is not Fanny Mae or Freddie Mac it is their share holders and depositors.

Banks will generally loan 4 to 1 on deposit to loan ratios. This means for every $1 million of deposits the bank is willing to loan out $250,000. As a borrower you can use this to your advantage. Banks will generally leverage their deposit portfolio for their unique lending portfolio products. If the bank is in a position in which they would have to foreclose on a portfolio loan their deposit base is now at risk and their ability to do loans in the future is at risk.

As a borrower you want to know this information. Most of the time we are afraid of the lender and just want to hide under a rock because we are late on our payments and worried that our house will be yanked out from underneath us. First of all the foreclosure process takes 6-9 months. However, work with the banks. They generally have as much self interest in the property as you do. Remember you are the asset that has secured the physical property securing the loan.

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