Sunday, November 15, 2009

Chase Bank's Parallel Foreclosure Policy when home owners ask for a home loan modification, an evil way to do business when better alternatives exist.

I have now read numerous articles about Chase Bank. I don't want to over exaggerate and say I have read hundreds of articles, but I also don't want to under exaggerate and say it's only been a few dozen either.

Home Loan Modifications is a very very hot topic. One of the biggest talking points the democrats offered prior to the 2008 elections was helping people save their homes. The democratic gains in congress and the winning of the white house was in part due to their promise to help homeowners who were struggling with too much debt and not enough job opportunities.

Most homeowners would be happy if they could either pay down their debts, or simply tread water. To that end, just what has changed since the 2008 presidential election? Americans assumed that home loan modification programs would not only be implemented, but also be fast tracked. There has been no fast tracking that I am aware of for the purpose of saving people's homes, and understanding why might help lead to a solution.

Lets quickly recap what has caused banks such as Chase Bank to thwart the american homeowner's desire to simply be able to afford their home without becoming a deadbeat.

News stories began appearing about people who were giving up on their home loans and just staying in their homes for free until they were forcibly evicted. Stories floated around on the internet about people living for free for over a year and still not being evicted.

Other stories came out that if one asked for the "note" to be produced by the bank that the homeowner had signed when they originally accepted a loan from the bank, a delay of several months to over a year could result. In some instances the note could not be found and this caused additional delays as well.

While stopping home mortgage payments or asking for the note sounds like a way to get back at "the system", it's also an antagonistic maneuver that I believed would result in banks such as Chase Bank responding with new and more aggressive tactics.
Enter Parallel Foreclosures. Apparently the banks won't renegotiate a lower interest rate on a home loan unless the homeowner falls behind in their payments. However, the moment the homeowner falls behind with their payments, banks such as Chase Bank begin a process called Parallel Foreclosures.
Even as Chase Bank is allegedly re-negotiating the homeowner's mortgage loan, another Chase Bank division is busy filing foreclosures papers on the homeowners home!
So, just as I initially suspected, the banks have decided anybody who is looking for a home loan modification might just be stalling, and to combat that stalling, banks such as Chase Bank begin the process of foreclosing on the homeowner's home as soon as possible.

There are so many obvious reasons why this is the wrong path by the bank to be taking that I will be devoting a chapter in my upcoming book, The Cat Who Ate Chase Bank, to the parallel foreclosure issue. However, for the here and now, I would like to offer a solution.
If a homeowner has experienced a significant depreciation in the value of their home in the past couple of years, the affected homeowner should AUTOMATICALLY be eligible for a home loan modification without it triggering a parallel foreclosure by banks such as Chase Bank.
As the percentage of a home's depreciation increases, the lower the interest rate the home owner can be offered for their home loan modification.

The usefulness of this idea is boundless. If the banks choose to claim that a customer's home has not lost much value, then the banks should make a home equity line available on the home in line with the minimal loss in value that they think the house has depreciated.
If the bank agrees that the home has devalued significantly, then the homeowner benefits by getting a super nice interest rate on their home loan in exchange for the loss of home equity. The homeowner and the banks are protected no matter which route is taken!
If the bank believes a home has not lost that much home equity value but is also worried about a homeowner taking the home equity line and skipping town, just limit the amount the homeowner can take out every month to a relatively small percentage of the entire equity line. Just limit equity line withdrawals at around 3 to 4 percent of the total they are eligible to borrow.

Since the homeowner's loan is being modified based on home depreciation and home depreciation only, the homeowner cannot be suspected of trying to scam the system so there is no need to file parallel foreclosure papers for the home loan remodification.
Home Depreciation Loan Modifications become a win win for EVERYBODY! Lower banking costs are required to process the Home Depreciation Loan Modification, and surreptitious behavior by the banks involving parallel foreclosures can be greatly mitigated.
Homeowners either get a more generous home equity line to borrow from if the banks want to claim there has not been as large a depreciation in the home as the homeowner is claiming, OR if the banks are claiming a higher depreciation than the homeowner believes is accurate, the homeowner gets an even more attractive home loan modification on their existing home loan!

I believe this idea I am presenting is a direct result of all the contemplating I have done for my book, the Cat Who Ate Chase Bank. I think this idea could be fast tracked and end the acrimonious situation that presently exists between banks such as Chase Bank and home owners wanting to renegotiate their home mortgages.

What do you think?

Alessandro Machi also collects not so nice stories about Chase bank at the following blogs, The Cat Who Ate Chase Bank, Daily-Protest, Bloggers Against Chase Bank, and Robots Against Chase.

Article update - (Thursday, Nov. 26, 2009) Parallel Foreclosures can eventually lead to law enforcement being used to forcibly move people out of their homes even without a judge having ever been involved!
Banks using Police Officers with guns without a judge to make sure everything has been handled fairly and ethically, we can do better than that, no ???

3 comments:

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