Banks are in the business of making money, and they do that very well. The 10 largest banks in the US have $11.8 trillion in assets, according to Bankrate. Their portfolios include things like investment accounts, credit cards, and mortgages from millions of people. Mortgages may be the most sensitive of them all , as they are given to people to buy  homes where they will live their day-to-day lives for years to come.

When people can no longer make their mortgage payments (as was the case in the housing crisis that started in 2007 and lasted a few years) banks can exercise their legal right to proceed with foreclosure. That happened in 2008 and in the following years, we found out that banks had actually been playing a dangerous game that lead to the collapse.

The whole foreclosure and auction thing really gets me, though.  The bank logic just doesn’t make sense to me. Someone can’t afford to make mortgage payments, so when attempts to collect are unsuccessful, they go through all the procedures necessary and foreclose on the house. In many cases, the house stands empty for years. Maybe it’s auctioned off at a fraction of what was owed. Now, someone new has gotten a home at a huge discount, the bank has lost a ton of money, and the original homeowner is displaced. Sometimes, neighborhoods never recover.

Wouldn’t it make sense for the bank or mortgage company to try and work  something out with the original home owner? That way, they don’t have to go through the long and costly foreclosure process  and homeowners can keep their home. Maybe they think if they were more flexible, people would take advantage and not pay their mortgage. I don’t think that would happen.  I think the majority of people would continue pay their mortgage as usual.

What do you think?



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