Often I get asked why banks are not foreclosing on borrowers even after they do not make mortgage payments for many months. Actually, the answer is quite logical. To fully appreciate the banks position we must understand that the current housing market is like a Rubik’s cube. Every action the bank takes creates a challenge on the other side of this real estate puzzle.
The banks have no thirst for vacant properties for two reasons:
1.) Once they take ownership of the house through foreclosure they become liable for the property.
In many cases it is easier to hold off the foreclosure process and let the borrower continue maintaining and ‘house-sitting’ the property.
2.) The banks realize that an empty house impacts the value of other homes in the area.
Banks have mortgages on many of these surrounding properties. If value is affected, there is a greater chance that those borrowers will stop making mortgage payments.
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