This household has looked foreclosure straight in the eye and asked our mortgage lender for help. No help was offered, it was before the foreclosure hotline opened in Colorado, and we got the distinct impression that the bank would have loved to grab a house and sell it in what was then a hot market. The market has cooled but still there is a rush to foreclose and a hostile attitude toward mortgage holders (aka home owners).

Colorado is pushing a bill to let judges hold them horses so that mortgage holders can get it together without all the hostility toward them.

Wait Three Months, Will Yah?

In the article a woman doesn't have money problems but communication problems with her bank.

So . . .

Why are banks/lenders in a hurry to foreclose?

What's up with this hostility toward mortgage holders (aka home owners)?

We learned never to trust mortgage lenders in a crisis. It's like they want to punch holes in the boat to make it sink faster.

Why are banks/lenders in a hurry to foreclose?

• Because - in fractional reserve banking - they've lent money that they don't have.
• Because - in the "sub-prime" mortgages - they've lent money to people who couldn't really afford to borrow it, certainly not if circumstances changed.
• Because - driven by the Collateralised Debt Obligations they've all bought and sold one another in the collossal scam that made sub-prime lending possible in the first place - they have no clue of the size of the liabilities they now have for bad debt. It always was bad debt, but some whizzkids decided to call it "sub-prime lending" so that it could be sold on to someone else as a profit opportunity.
• Because - in the credit crunch driven by this CDO, sub-prime crisis - banks can't get money by lending to and from one another, because they no longer trust that they'll get it back. In turn because they don't know how much of the money they're lending is being used to cover someone else's bad debts.
• And because - driven by the previous "becauses" - the only source of liquidity they have left is the property securing all of the debt. Regardless of falling property prices, getting back a portion of the money you're owed now is "better" in the current financial markets than getting all of it back with interest in 30 years' time. And it's certainly better than all the money you've lent going the way of Bear Stearns or Northern Rock.

And the real, underlying "because" is that, as was ever the case, financial markets are prone to periodic denials of reality that permit massive growth for the already wealthy and then crash on the poorest when reality reasserts itself. The poorest don't make much money for the wealthy; it's the speculation that does that. So, they can be safely ignored by the system, which will eventually recover and come up with the next way of "creating" wealth - in this case though a combination of magicking most of it from thin air and transferring the rest from the many to the few.

What's up with this hostility toward mortgage holders (aka home owners)?

There is no hostility, particularly. No special love either. Your home is just an asset on their balance sheet, and they've suddenly discovered their liabilities are bigger than they assumed they were - mainly because the CDOs that they thought were assets were in fact liabilities in disguise all along.

Personally, my own home is worth many times the mortgaged value. That's more luck than judgement - I bought at the bottom of the last UK house price tumble and when I remortgaged a few years back it was for less than two thirds of the current market value (even allowing for a recent fall in market vaues where I live).

I can't feel smug about this, though - I only bought it where and when I did because I needed somewhere to live after a job move, not as an investment.

I am somewhat encouraged by calls from some commentators for the reform or abolition of limited liability companies to transfer some liability onto stockholders and management - more like partnerships, or the Names at Lloyds of London, who can make vast profits but who also have to face personal ruin if their ventures fail.

I think something like this would be a sensible shift of emphasis, especially for corporate board members, who - even in businesses like Bear Stearns or Northern Rock - still stand to walk away from their failures with fat bonuses and severance pay.

Julian, you have a good handle on how the mortgage banking business works, but hostility does exist in this neck of the planet. From the article, the woman interviewed had squared up with the bank but the bank was still harassing her. This might be passive-aggressive behavior, incompetence or extremely bad customer service. It might also be a way of making people walk away from their homes when they don't have to.

I'm suspicious that the ulterior motive is to cheat people out of their homes. It is the opposite of the con job. The banks are using scare tactics against home owners. The state of Colorado is fighting back (bless our Demos in the state congress) by simply putting mortgage experts who are on the consumer's side onto a hotline. But giving the judiciary the ability to hold back the wolves for three months is a deluxe move.

So what is the other side of this? Is it truly that mortgage bankers are in deep car-car or are they using a weak economy and higher interest rates to leverage their old mortgage holders, who have probably paid down to where the interest isn't that high any longer, grab the houses and get brand new high-interest paying suckers in there?

Yeah, we can shrug and go, "It's just doing business," or we can fight back and go, "Here Comes The Judge, (appropiate expletive)!"

And by the way, all ARMs are not evil. I did an article on this a few years back. Those folks who got ARMs with their eyes wide open aren't suffering because either they locked in for a period of time (up to 15 years) or followed their plans to refinance/sell. That's a little beside the point though, just added it because it looks like the lady in the article knew what she was doing up to the point of foreclosure threats.

Why are banks/lenders in a hurry to foreclose?
This sounds like a regional thing (and not good news for my brother, who could lose his home soon due to disability). Banks here in California are definitely not eager to have a bunch of property on their hands, and are bending over backwards to help homeowners keep their homes. It costs money to foreclose, and banks lose money unloading the properties. This doesn't look good on their bottom line, and makes shareholders unhappy. And goodness knows, banks don't want their shareholders unhappy.

What's up with this hostility toward mortgage holders (aka home owners)?

Typical bank behavior. I faced this after the Northridge earthquake (I had been laid off a week prior). I called my lender (in Texas) to see if they would work with me to keep my home and all I got was "we'll waive the late fee". Big whoop. So, I lost my home of 13 years (BTW, a fixed loan) because the job market turned to crap and I couldn't find a job quick enough to save it from foreclosure. I believe things would have been different if the market were as stressed as it is now, and my lender had been in California and been more familiar with the devastation of the quake.

I'm surprised that lenders in Colorado are being so hostile toward a borrower who is eager and willing to bring her account up to date. From what I have seen, the Colorado real estate market is suffering nearly as much as ours. It would be in the bank's best interest to help homeowners who are making a good faith effort to pay their loans. Sounds kind of stupid to me not to do so.

Why are banks/lenders in a hurry to foreclose?

They may have a liquidity problem in your area. Banks generally don’t want property if they can avoid it.

What's up with this hostility toward mortgage holders (aka home owners)?

Again may be local. If the bank is in financial trouble and you own them money you can expect them to aggressively go after you for it.