Earlier this month a reader, Pamela Norvell, wrote a suggestion for lessening the foreclosure crisis. She suggested a freeze and/or a rollback of interest rates to their original levels. In making her suggesting Ms. Norvell wondered what it was causing lenders to foreclose on properties rather than do a workout or a restructure. Made us curious too.
The cost of a foreclosure, it turns out, is pretty staggering and we wonder why lenders and the investors they represent aren't jumping at a solution, any solution, that would allow them to avoid going to foreclosure whenever possible.
According the Joint Economic Committee of Congress, the average foreclosure costs $77,935 while preventing a foreclosure runs $3,300.
The cost of preventing a foreclosure is not easily categorized. We assume that it includes the staff costs of talking to the borrower, collecting financial documents (a task we have noted seems unreasonably difficult for the borrower) reviewing the documents, ordering and reviewing the appraisal, the cost of that appraisal (more likely to be a less expensive brokers price opinion or BPO) and the preparation of a justification to decision makers for any workout plan.
A Look at Foreclosures Costs
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