Housing Your Sorrows in Loan Modification

Your mom pays your brother $5 to clean the house, but she will pay him $10 if he does nothing at all.  How much house cleaning is your brother going to do?  Sometimes FDIC insurance works that way with home loan modifications. Yes, your bank account is insured up to $250,000.  In 1933 the Glass-Steagall Act created a temporary governmental corporation called the Federal Deposit Insurance Corporation (FDIC).  Eighty years later, FDIC continues to back the safety of deposits. However, because of FDIC insurance, banks are often better off to foreclose instead of modifying your loan. When one bank buys another, the buying bank is not inspired to mitigate the losses since FDIC will pay the buying bank at a profit for distressed property.  Thus the lender, or servicer, is not highly motivated to modify the loan. “Banks are motivated to help people get loan modifications”—yeah, and my brother has photos of Bigfoot.  That being said, I have seen success through St. Johns Housing Partnership (SJHP).  To learn more about mortgage modifications and what SJHP can do for you, visit http://sjhp.org. Read More

The FDIC Footfall on Home Loans

It takes the owner of a loan to modify that loan…the other shoe to fall is FDIC insurance. A foreclosure often nets a bank less than half of the loan’s unpaid balance, so why do they not negotiate instead of letting the home go into foreclosure?  Easy answer:  money.  As banks buy banks and take over loan servicing, they are insured for loss through the Federal Deposit Insurance Corporation. In 1933 the Glass-Steagall Act created a temporary governmental corporation called the Federal Deposit Insurance Corporation (FDIC).  The FDIC guarantees the safety of deposits up to $250,000 per depositor per insured bank.  Thus bank customers are assured a certain amount backed by the federal government.  However, that insurance may interfere with your mortgage negotiations. The bank may let your house go on the courthouse steps for far less than what you could have gotten in a short sale.  That is not necessarily the bank being lazy.  That is the bank making more money through an FDIC claim (with the added benefit of not having to go through the hassle of negotiation with the homeowner). Because of FDIC insurance, the lender, or servicer, is not highly motivated to modify the loan.  That […] Read More