Lender decisions are influenced by contracts issues, such as Repurchase Agreements, Mortgage Insurance, Credit Default Swaps, and FDIC Lost Sharing Agreements.
Repurchase Agreements can be a problem because some of the mortgage guys who made the loans might be out of business now. Mortgage Insurance isn’t just taken out by the borrowers, but sometimes by the lenders as well. Repurchase agreements are a contract type which has the Government writing blank checks in order to help banks with upside loans. Loan servicers have any number of different instructions on what to do with upside down loans, making it very difficult to know why the lender made the decisions they made on any given day.
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