Banks delay foreclosure auctions to avoid losses

Homeowners who are behind on their mortgage payments often make a mistake that, if not made, would allow them many more months to recover financially before losing their home. This mistake is when borrowers move out of their home before they are legally required to do so. And now, with the foreclosure rate soaring in recent years, there are even more reasons to stick around as long as possible.

Of course, a small number of homeowners realize the financial advantages of delaying the final move to a new apartment or rental home for as long as possible. Every month without paying your mortgage or rent is extra money that can be used to pay other bills, keep up with your car payments, or simply save for a security deposit or emergency fund. And as long as they still have legal rights to stay, there’s no reason to move just yet.

Some homeowners even go to great lengths to get even more time from the bank to stay in their home. They go to great lengths to seek foreclosure remedies, request deferrals of a sheriff’s sale, and defend the lawsuit in court for months on end. Finally, they file for bankruptcy to prolong the process even further. In many cases, this can result in months or years of living rent and mortgage free.

However, far more homeowners fall behind on their monthly bills, listen to the lender’s threats of foreclosure, and simply move out of their home. The property sits derelict while the banks take it through the foreclosure legal process, and then sits derelict while the bank hires a local realtor to sell the house. In the meantime, if it falls into disrepair and becomes a victim of squatters or people stripping the property of anything of value.

However, now that banks have so many foreclosures on their books, many foreclosure auctions are simply postponed for no apparent reason. While more homeowners than ever are applying for assistance, sheriff’s sales are further delayed. Furthermore, lenders are often incompetent enough to proceed with a public auction on a home, even if the borrowers are negotiating a loan modification or other plan.

This indicates that banks are voluntarily postponing some sheriff auctions to avoid having to declare loans as losses and then declare properties as assets at their true market values. Banks have gotten away with overestimating home values ​​for years to inflate the values ​​of home loans and the values ​​that make up these mortgage debts.

However, a sheriff’s sale has the effect of nullifying all of these fraudulent financial calculations. The property is auctioned for a very small amount and the remainder of the loan is written off as a loss. The bank must then take possession of the house if there are no third-party buyers and declare the fair value of the house on its balance sheet. This may be slightly less than the appraisal indicated at the time the loan was originated.

Thus, banks are avoiding this problem of living in reality by quietly postponing the sale dates. Even if no one lives in the property, there may be a delay in the sale; all the bank has to do is contact their local attorneys, who contact the court and sheriff’s department to cancel the sale and reschedule it for the next month. .

This is a new development in the foreclosure crisis that more homeowners should take advantage of. The banks don’t want to own these properties, and they sure don’t want to declare them at their true market values. With a little effort, borrowers can delay the sale for a quarter of a year or more, simply because there is a large backlog of properties in some stage of foreclosure.