It is hard to overstate how far banks will go in the pursuit of solvency and profitability. You can hardly blame them—they are institutions that would perish if it weren’t for their unshakeable devotion to the bottom line, and the US economy wouldn’t be what it is today (in a manner of speaking). Here are more banking practices—official and unofficial—that would thwart your attempts at refinancing or a home loan modification.
Don’t share unnecessary details
Banks have been accused of taking savings from 401ks to cover monthly payments owed by delinquent borrowers. This practice is surely a sign of the times as banks have virtually resorted to stealing in order to maintain profitability. Keep what financial data you can away from banks and lenders. This practice is becoming more a rule than exception.
Watch out for deficiency payment schemes
If you are in a short sale, banks could come after you later for deficiency payments. This murky legal area provides them the all the law banks need to sue you for the difference of the amount between the short sale and your original mortgage. We aren’t talking small sums either. In some instances, banks have pursued former clients for hundreds of thousands. Deficiency suits are even more common from second lenders, who often get the short end of the stick from a short sale deal.
No special provisions for homes deep ‘underwater’
There have been rampant complaints about banks completely aborting loan modification talks or denying loan modifications to individuals whose homes are deep underwater.
If you aren’t familiar, an underwater home is worth less than what is owed on the principal of the mortgage. Individuals trapped in this bad investment should know that a bad investment of them is a bad investment for the bank. You won’t find a bank eager to settle for less. While it is logical for an underwater homeowner to expect some relief on this bad investment, it is logical, too, for a bank to have an expectation that homeowners pay back what they borrowed.