Lender's Assembly Line Approach To Foreclosure Transforms $28K Loss Into $42K Loss, Booting Loan-Mod-Seeking Homeowner Onto Street In The Process

The Wall Street Journal's Developments blog recently reported on an interesting account of a foreclosure, titled “Two Cords of Wood,” written by Maine pro bono attorney Thomas A. Cox.
In it, Cox reportedly writes on how second mortgage holder KeyBank refused to restructure the payments on a $28,000 loan for one of his clients, despite the fact that the client was current on the payments on the first mortgage (approximately $50,000) and, instead, coughed up the $50K to buy out the first mortgage, and then foreclosed on the homeowner, spending $4,000 in foreclosure costs in the process.

KeyBank then proceeded to boot Cox's client out of her home, and, with a cold winter approaching, is now stuck with a vacant home now reportedly listed for sale at $44,900.(1)

For the story, see A KeyBank Foreclosure Draws Fire.

(1) If my math is correct, and assuming KeyBank nets at most $40K from the sale of the home listed at $44,900, KeyBank appears to have 'skillfully' transformed a $28,000 loss from a worthless second mortgage that the homeowner was willing to make payments on into a $42,000 loss as a result of its manuever ($50K (1st mtg.) + $4K (f'closure costs) less $40K (est. sale proceeds) equals $14K loss on its sophisticated maneuver. Then add $28K worthless 2nd mortgage to get to $42K).