2007-01-27 10:39:20 · 3 answers · asked by bo 1 in Business & Finance ➔ Renting & Real Estate
Banks purchase loans that were originated by loan brokers. The bank relies on info supplied by the loan broker. Frequently, the broker stretches the truth (to put it in a nice way) about the home and the borrower. They also put pressure on the appraiser to "hit the value" so the loan will work. Many times the borrower has no real chance of repaying the loan as it is written. The loan broker usually adds several thousand dollars in "loan fees" which is how they get paid. In other words, no one gets rich except the loan broker.
2007-01-27 10:49:42 · answer #1 · answered by dreamgirl 5 · 1⤊ 2⤋
It costs a lot of money for a bank to foreclose, but they are NOT losing money. Any money they "lose" they send the loan to the FHA insurer or the PMI insurer. The insurer pays the bank up to 20% of the loan amount for any money they don't recover from the foreclosure.
2007-01-27 23:02:01 · answer #2 · answered by stevegreen 1 · 0⤊ 0⤋
Because people do not pay their loans.
Foreclosure is the last resort for the lender. It's the lender admitting it made a bad loan, cutting its losses, and moving on. If the bank forecloses, it stops bleeding more loss from the transaction.
2007-01-27 18:45:17 · answer #3 · answered by CJKatl 4 · 0⤊ 0⤋