What is the bank’s role in the foreclosure process?

by oliver on September 30, 2010

Question:

What is the bank’s role in the foreclosure process?

I am writing a paper with a solution to the current foreclosure problem, but I need to know what role the banks play in the process of foreclosure, in order to have a counterargument to my solution.

Answer:

The role of the bank in the foreclosure process may be of two ways. First would be that aside from the borrower, they can be accountable for the continuing occurrences of foreclosures in the country. Since banks thought that the economy is doing fine and that people will continue repaying their mortgage, they have given loans to people who should not have deserved it. They gave mortgage loans to home buyers even if those people cannot really pay for their mortgage in the long run. Therefore, when the economic crisis started in 2007, many people lost their jobs and so, many have not paid their mortgage, resulting to foreclosure.

Once the borrower misses his payments for at least three months, the second role of the bank or lender rises. The bank or lender files for a foreclosure against the borrower to recover its losses. In as much as a foreclosure can gravely affect a borrower, such event can also cause unexpected losses and expenditures for the bank. Therefore, banks will most likely make a way to prevent the process of foreclosure. It is suffice to say that bank’s try to make amends and cleans their own mess. However, it is not only the bank that should be blamed for a mortgage crisis. The borrower should be aware of the housing industry, the market economy and his capability to pay his loans before applying to one.

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