foreclosure loss affects on banks

[mwesthoven]

i need help! i am currently in the process of filing bankruptcy and aside from that, i have to do a report for one of my classes. i want to report on how banks can afford to take a loss on foreclosures. I owe 117000 on my house and when it goes to sherriff sale, it might sell for say 85000. with bankruptcy becoming so common, how does a bank afford to take a loss on so many foreclosures? i have done so much research on this and and coming up with nothing. i love this site and i know someone will know the answer to this.

[Minnymouth]

Okay for example:

You buy a home for $60,000..... payments are $600 a month..... $50.00 a month goes on principal.....$550.00 goes towards interest.

If you own the home 10 years and foreclose, you have already paid $66,000 in interest, and $6,000 on the principal. Thus you have spent $72,000 already on the home. More than what you borrowed. So the lender has ALREADY made his money. Now he can foreclose on you and SELL THE HOME still at a reasonable price to make up the difference of any interest/principal you might owe them. They make the rest of the interest off the new buyer........ plus more interest.

Banks do not loose as much as they might let on........ cause you pay mostly interest first...........for about 10 years, before you see much coming off on the principal.

Remember banks are in the business to MAKE MONEY, and if the truth was known, they probably MAKE BUCKS off foreclosures, instead of loosing a dime.............

I know my bank made their money back - interest - PLUS...... they weren't crying too loud at the sale.

I don't feel sorry for any bank in foreclosure...........they aren't loosing anything..........they make the money off the interest,they get the property back, resell it and make money off another client (interest paid first).

So, I tell them "cry me a river"....................

[SinkingFast]

They have default reserves set aside to cover bad debts.

Our discharged debts become tax write offs.

I read somewhere that when houses are in default, that's really when loan servicers make their bigger bucks.

Say CountryWide is the loan servicer on your acct. Every month you pay your payment, say CW makes 1/4% for collecting your payments. But when you default or are late, CW starts adding on fees and penalties. If you pay, the fees and penalties are collected by CW on top of their monthly take.

We sold our house after being 5 months in arrears. CW added on $8K in penalties, fees, interest, and legal costs. That's way more than the whatever % they woulda got if we had just continued making payments.

So for the people they do loose on, there's others they collect big time on. The BK Court has started looking into this due to outrageous mortgage pay-off differences shown in Ch 13 cases.