I Wonder If Bankers Get It
There was a big story in the St. Petersburg Times today stating that in Florida, foreclosures remain high but seem to be on the decline.
It was a long story so I'll summarize it: During July, 1 out of every 171 Florida homes received a foreclosure filing of some kind. That's right, 1 for every 171 homes.
Perhaps the reason foreclosures appear to be on the decline is because there isn't anybody left to serve foreclosure papers on!
I'm going to make a generalization here. I'm going to lump everybody who makes mortgages into the term "banker". That may not be entirely correct or fair, but I'm going to do it anyway for the sake of simplicity.
So, here's the question: Have bankers ever have stopped to think about what these foreclosures are doing to their image as an industry? Remember, I used to be in the public relations business and I still think about matters like that.
Certainly, the person who just received a foreclosure notification is no longer going to go to that bank for financial services -- even after he gets back on his financial feet! He'll find some other bank to meet his needs, and the banker who foreclosed will have lost a customer forever. Bankers need to remember that an unhappy customer will tell everyone about how unhappy he is with you, thus compounding the loss of business.
Some friends who are bankers and I have discussed this matter over Cool-Aid. They look me right in the eye and ask what they are supposed to do? The homeowner is behind. The homeowner can't make his payments. The homeowner is underwater in the mortgage. The property secures the note, so they have to go after it. What are they supposed to do, ignore the matter?
Sure. Sounds like a banker talking, doesn't it? And from a business viewpoint it's hard to argue with the reasoning.
But here's something bankers ought to think about before they drop the f-bomb on some struggling homeowner.
First, they will lose that customer forever. Many of those customers will survive economically, but that bank will never see them again. Over the remainder of his lifetime, that foreclosed-upon person may do hundreds of thousands of dollars -- perhaps millions -- of banking business that will be lost due to an old foreclosure.
Second, on average in Florida, it costs the bank about $50,000 to foreclose on a property. I've heard that the foreclosure figure averages as high as $69,000 in Florida, but I'll use the lower figure here. Suffice it to say that foreclosure is costly.
Third, after foreclosure the bank has to sell the property, probably at a deep discount, and probably for less than the amount of the outstanding mortgage. So, the bank loses money anyway.
Fourth, the longer a foreclosed property sits vacant, the more it deteriorates. As it deteriorates, it pulls down the value of the other homes in the neighborhood. So, as property values decline in the neighborhood, the value of the bank's foreclosed property drops right along with the other property values. Remember, when the tide goes out in the marina, all boats sit lower in the water.
It's easy to see the financial problems that happen in a foreclosure. What I'm wondering is if the bankers are even aware of the public relations problems that are beginning to mount with this wave of foreclosures.
It's not just the foreclosed homeowner who will dislike the bankers, it's John Q. Public who is beginning to ask why these bankers are so heartless and won't do anything much to aid folks -- many of whom are unable to make their payments through no fault of their own. More and more, it appears that banks are giving financially strapped people only three options: foreclosure, short sale, or deed in lieu. And for each option the homeowner loses the house.
Banks make a good point by saying that loan mitigation is proving to be unsuccessful for the majority of debtors. But a lot of that has to do with the extremely high levels of unemployment in Florida and throughout the United States. When your job gets shipped off to India and you can't find another one, well, the homeowner is going to have a hard time making payments -- mitigated or not. C'mon, let's be fair and logical about this. Maybe bankers have to be a bit more open-minded about loan mitigation and give people more than one chance at it.
Anyway, here's the point of all this. Bankers are beginning to look real bad to most folks because it appears they are heartless, uncaring money-grubbers who don't give a blankety-blank darn about helping people solve their mortgage problems -- and the rising number of foreclosures, short sales and deeds-in-lieu support the mounting loss of respect the public feels toward bankers.
Yet, foreclosures seems to be continuing. Question: Do bankers not get it, or don't they care? Are they so fixed on the dollars that they can't see the damage being done to their own reputations?
There used to be a saying in this country, often quoted by bankers. "If you can't trust your banker, who can you trust?"
Somehow, I think that in 1 out of every 171 homes in Florida in July, the bankers might not like the answer to that question.
-30-
It was a long story so I'll summarize it: During July, 1 out of every 171 Florida homes received a foreclosure filing of some kind. That's right, 1 for every 171 homes.
Perhaps the reason foreclosures appear to be on the decline is because there isn't anybody left to serve foreclosure papers on!
I'm going to make a generalization here. I'm going to lump everybody who makes mortgages into the term "banker". That may not be entirely correct or fair, but I'm going to do it anyway for the sake of simplicity.
So, here's the question: Have bankers ever have stopped to think about what these foreclosures are doing to their image as an industry? Remember, I used to be in the public relations business and I still think about matters like that.
Certainly, the person who just received a foreclosure notification is no longer going to go to that bank for financial services -- even after he gets back on his financial feet! He'll find some other bank to meet his needs, and the banker who foreclosed will have lost a customer forever. Bankers need to remember that an unhappy customer will tell everyone about how unhappy he is with you, thus compounding the loss of business.
Some friends who are bankers and I have discussed this matter over Cool-Aid. They look me right in the eye and ask what they are supposed to do? The homeowner is behind. The homeowner can't make his payments. The homeowner is underwater in the mortgage. The property secures the note, so they have to go after it. What are they supposed to do, ignore the matter?
Sure. Sounds like a banker talking, doesn't it? And from a business viewpoint it's hard to argue with the reasoning.
But here's something bankers ought to think about before they drop the f-bomb on some struggling homeowner.
First, they will lose that customer forever. Many of those customers will survive economically, but that bank will never see them again. Over the remainder of his lifetime, that foreclosed-upon person may do hundreds of thousands of dollars -- perhaps millions -- of banking business that will be lost due to an old foreclosure.
Second, on average in Florida, it costs the bank about $50,000 to foreclose on a property. I've heard that the foreclosure figure averages as high as $69,000 in Florida, but I'll use the lower figure here. Suffice it to say that foreclosure is costly.
Third, after foreclosure the bank has to sell the property, probably at a deep discount, and probably for less than the amount of the outstanding mortgage. So, the bank loses money anyway.
Fourth, the longer a foreclosed property sits vacant, the more it deteriorates. As it deteriorates, it pulls down the value of the other homes in the neighborhood. So, as property values decline in the neighborhood, the value of the bank's foreclosed property drops right along with the other property values. Remember, when the tide goes out in the marina, all boats sit lower in the water.
It's easy to see the financial problems that happen in a foreclosure. What I'm wondering is if the bankers are even aware of the public relations problems that are beginning to mount with this wave of foreclosures.
It's not just the foreclosed homeowner who will dislike the bankers, it's John Q. Public who is beginning to ask why these bankers are so heartless and won't do anything much to aid folks -- many of whom are unable to make their payments through no fault of their own. More and more, it appears that banks are giving financially strapped people only three options: foreclosure, short sale, or deed in lieu. And for each option the homeowner loses the house.
Banks make a good point by saying that loan mitigation is proving to be unsuccessful for the majority of debtors. But a lot of that has to do with the extremely high levels of unemployment in Florida and throughout the United States. When your job gets shipped off to India and you can't find another one, well, the homeowner is going to have a hard time making payments -- mitigated or not. C'mon, let's be fair and logical about this. Maybe bankers have to be a bit more open-minded about loan mitigation and give people more than one chance at it.
Anyway, here's the point of all this. Bankers are beginning to look real bad to most folks because it appears they are heartless, uncaring money-grubbers who don't give a blankety-blank darn about helping people solve their mortgage problems -- and the rising number of foreclosures, short sales and deeds-in-lieu support the mounting loss of respect the public feels toward bankers.
Yet, foreclosures seems to be continuing. Question: Do bankers not get it, or don't they care? Are they so fixed on the dollars that they can't see the damage being done to their own reputations?
There used to be a saying in this country, often quoted by bankers. "If you can't trust your banker, who can you trust?"
Somehow, I think that in 1 out of every 171 homes in Florida in July, the bankers might not like the answer to that question.
-30-
posted by Terry Ward at 4:51 AM
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