Sometimes, trying to understand the mindset of the collective financial and banking industry is an exercise in futility. What you think is financially impossible for creditors can sometimes be the exact thing they’re doing. There was a time in the not so recent past when the thought of a financial settlement outside a courtroom was unheard of.
Borrowers who’d fallen behind in payments simply were not extended any kind of settlement offer. Now, there’s another much bigger dynamic that’s blown onto the scene. Find out what it is below, along with several other financial facts that will have you wondering if you misunderstood.
Buying Foreclosures
Many of the nation’s largest banks are increasingly worried about their troubled mortgages and what they’re going to do with them, especially considering the massive robo-signing catastrophe of 2010. So, in an effort to save face, save their profits or both, banks are offering up to $35,000 (and in extraordinary cases, even more cash) to delinquent homeowners to sell their properties for less than they owe.
While this isn’t necessarily a new concept, as mortgage lenders and banks have traditionally been successful in delaying or blocking these short sales, they’re now rethinking their policies. They understand it’s far less expensive and time efficient than the actual foreclosures.
In order to hasten the speed of these sales (which, ironically is what got them in trouble with the robo-signing debacle), they’re pre-approving potential buyers, fast tracking loan closings and, of course, providing great cash incentives to the current property owners.
Remember, these foreclosures often take at least a couple of years and the recent lawsuits that resulted in the major banks freezing their current foreclosure efforts due to the legal goings-on, they know these foreclosures can take even longer. Not an ideal way to do business, especially if you’re in the financial sector, is the mindset of many analysts. Losses for lenders are about 15 percent lower on the sales than on foreclosures; meanwhile, taxes and legal, maintenance and other costs accumulate, according to Moody’s.
The notifications are quite blunt, too. The letters from many banks start with an offer that’s tough to pass up: You could sell your home, be finished with your mortgage in its entirety and get $30,000 cash, reads one of those letters.
One JPMorgan spokes person explained it this way in late February,
When a modification is not possible, a short sale produces a better and faster result for the homeowner, the investor and the community than a foreclosure,
the email reads.
With six straight years of tough housing markets, the recent economic troubles and the still-high unemployment, this might be the closest to a win-win homeowners and their lenders will find.
Off the Grid
There are hundreds of thousands of Americans who are making the choice to go “off the grid”. This means they are walking away from it all: the material things, credit cards, mortgages, car notes, insurance payments, retirement funds – they’re done. Finished.
While bailing on all of it is the preferred method, or so it appears, there are those who are preparing to go off the grid by paying off their mortgages, credit card debt and other bills and showing responsibility for their decisions. And they’re making big plans, too.
These folks are buying land and building their new homes with cash money. Generally, they’re building as they can afford it and are using nothing but cash or bartering as their currency.
Why such drastic measures? It’s simple: most say they’re tired of politics, marketing ploy, constant trip ups that are part of the contemporary financial sector. So, they’re either escaping their debt and just dropping off or their paying that debt off and leaving themselves open should they return to a more traditional lifestyle. And if you’re wondering how these folks are going to function without their Starbucks and Diet Cokes, we’re still trying to figure that out too.
These two shifts are indicative of the new financial sector that’s emerging as a result of the recession. There’s no denying it’s like none before it. The 1970s recession was devastating – and those who are old enough can remember the astronomic gas prices as a result of those dark days, but technology introduced a new dynamic that no one could have anticipated. One thing’s for sure: things will never be the same.
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