Upcoming Foreclosures

Why would a mortgage lender (bank) decide not to foreclose and charge-off a property instead?

Have a friend who's home was due to be sheriff sold this week. She received foreclosure papers in April. Today she receives a call from the bank and they have now decided to not foreclose on the property and told her that they are going to charge it off. How does that get it out of her name, and why when loans are FDIC would it have not been in the better interest of the bank to sheriff sale the home than to charge it off. Will the charge-off of the home hurt my friend more than if it had foreclosed?

Public Comments

1. She signed a deed in lieu of foreclosure. It's better for her in the long-run.
2. The charge off won't be any better or worse for your friend's credit rating that a foreclosure would be. Both indicate a serious lack of handling debt. If they 'charge it off', it doesn't get it out of her name. She ends up on the title, along with any other liens and problems which may exist on the house. Does she have a lot of unpaid back property taxes ? Is this house falling down ? It's apparent that the bank does not WANT the house, for whatever reason it chose. My guess is they think the foreclosure will cost them more than the house is worth.
3. For some reason the bank has decided they do not want the house. it could be that they know something about the house that makes them not want it. Flood plain, falling apart, asbestos, who knows. Only the bank knows why they don't want it. If I were the homeowner I would actually begin to wonder why the bank doesn't want it. that is very unusual. Also, loans are not FDIC insured. Bank accounts (where you deposit money) are FDIC insured, not loans.