Our Law Office deals with families whose homes are being foreclosed upon each and every week. We are continually asked by our clients why financial institutions simply don’t reduce the amount of the loan to coincide with the equity in their home, instead of foreclosing on their homes and selling it at auction for less than half of its real value. Unfortunately, it is extremely rare for a bank or other financial institution to reduce the principal in the mortgage to bring it back into conformity with the actual value of the house. Banks do not usually change their practices. Dropping principal balances to the amount of the actual indebtedness on the mortgage would be a departure from usual bank procedures. Banks simply do not wish to explain why the value of their mortgage portfolio on their financial statements are incorrect.

Banks Are In the Business of Making Money

Lenders don’t wish to write down the balance of defaulting loans because they do not see any upside for them in engaging in this practice. Banks are interested in making as much money as possible. Writing down loans does not accomplish this.

Writing Down Loans Will Not Avoid Default By Homeowners

Lenders do not believe that writing down mortgage loans will reduce the likelihood homeowners will default. Banks studies have shown individuals whose homes are underwater (there is a negative equity in the homes) will most likely be unable to pay their mortgages, even if the mortgage is renegotiated to the value of their home.

Mortgage Departments at Banks Are Understaffed and Undertrained

Most financial institutions want to deal with mortgages that are current and on which they are making money on. They look at servicing mortgages that are in default as a financial burden. This causes banks to be chincy on the amount of workers they hire to handle these loans and to skimp on the training of these employees. Mortgages servicing companies tend to be short-staffed and don’t have a lot of motivation to hire more employees on money losing loans.

Mortgage Problems and Solutions

Hopefully you are up to date on your mortgage, but should you be having financial problems and/or your mortgage falls behind, we may be able to help you obtain a mortgage modification. Should a mortgage modification not be available for you, we can represent you in a foreclosure proceeding and keep you in your home! Our foreclosure defense lawyers attend foreclosure court conferences for our clients. We meet with our clients and discuss foreclosure options, such as foreclosure related bankruptcy filings. We litigate, in New York State Courts, foreclosure defenses such as defective mortgages, violations of truth in lending laws, predatory lending and defective foreclosure lawsuits. We also can assist you in other real estate related problems.

Should bankruptcy filing be the appropriate way to deal with your foreclosure problem, we can file either a Chapter 7 or Chapter 13 bankruptcy for you. Upon meeting with us, we’ll discuss the types of bankruptcies that are available to you and why filing bankruptcy may help you. Filing a bankruptcy stops foreclosures from moving forward and can stop all debt collection activity. Call us for a free consultation. We appreciate your visiting our foreclosure blog.