Just as a side note it might be helpful to consider exactly what the margins are for lenders and how much (or how little) profit they actually make.
I once saw a local commercial bank get threatened with insolvency as a result of a single loan on a single property. If memory serves, the loan amount was less that $2,000,000, but this particular borrower decided to duke it out in court and he ran the lender’s costs to foreclose so high that they took a beating by the time they got the property back and sold it; and their initial loan was by no means unreasonable in relation to the value of the property. That borrower was savvy – they stopped making payments and used their attorney to abuse the system.
I have to believe that there are legions of attorneys out there who are ramping up their “stop foreclosure” arsenals even as we speak. They know that a certain percentage of overstressed homeowners will gladly work the system in exchange for a year’s free rent prior to eviction. And it won’t take very many of those lawsuits to further clog our legal system. Increased costs to foreclose will take it’s toll on both lenders and the availability of credit, which in turn can exacerbate pricing declines.
