Boston Bankruptcy Lawyer

Banks and Foreclosure

One of the greatest myths is that banks lose money on foreclosure. In a good market with escalating real estate prices, banks do not lose money on foreclosure since they are likely to recover all of their legal fees and any money owed on the mortgage due to the escalating home prices.

When a bank goes into foreclosure on a property, it takes about a year for the home to be put back on the market and then sell. In a good, or booming, market, the house’s value is likely to escalate significantly in that time. So while they won’t be getting much out of the mortgage payments (that’s why they’re foreclosing in the first place), the bank is likely to recover all of its losses and then make a profit.

Now, however, with the housing market not doing nearly as well as it had been doing, the bank is not likely to make a profit on a foreclosure. It is very likely that the bank is going to lose money on the foreclosure of a home. Not only is the bank likely to lose money but it is very likely that the bank will lose a lot of money. Depending on the area, some markets have dropped at least a quarter of their value.

Because of the likelihood of losing money, banks are much less likely to want to foreclose on the property. The current favored option of a bank is probably loan renegotiation. This option allows them to keep some money coming in and not lose the money between the value of the mortgage and the current value of the house.

Contact a Boston Bankruptcy Lawyer

For more information on loan renegotiation and other options for avoiding foreclosure, contact the Boston bankruptcy lawyer of Joshua Spirn & Associates at 1-800-975-5346.