Whoever has control over a foreclosure ought to ask a simple question: will my company make money or lose money by foreclosing? Foreclosing costs money. Owning property costs money. Insuring property costs money. Maintaining property costs money. Securing property costs money. Vacant property loses value. And then there is the reputational risk, the risk of being viewed as a first class prick. That won’t happen in all cases, but it sure will happen in some of them.
It costs money to sell foreclosed property. And just who, now-a-days, is going to buy your property? Sure, if you set the price low enough, someone is likely to buy it … or are they? Where are they going to get the financing? The smart guys on Wall Street have left no forwarding address.
So forget whether the borrower is in default. Ask this question: how can the borrower and my company make the best of the situation … together. Think outside the box. In the circumstances we all find ourselves in, a mortgage default should not be an automatic trigger to begin foreclosure proceedings. It ought to be an invitation to think things through, to look at the facts, especially what, if anything, the borrower can do to preserve the value of the property and reduce the cost to the foreclosing party of the misery we are all in. Some defaulting borrowers can still be a valuable resource.
Some banks are taking this approach. ALL owners of mortgage debt ought think through which borrowers have the financial ability to HELP the mortgage owner by staying the property, maintaining it, etc. Under some circumstances, a mortgage default can be a red herring, distracting attention away from even considering the possibility of the mortgage owner and borrower helping each other out of this god awful mess.
Lawyers, in particular, ought to give this idea some thought. Those who lick their chops because they are processing a high volume of foreclosures using boiler rooms full of data processors and who do not stop for a moment to consider that their clients might be better served by something other than foreclosure are not as bad as war profiteers but nor are they acting like real lawyers.