How Do Lenders Come-Out Even (Or Profit) When Collateral Is Lost?

[dkwemn]

In the Rare-Event that a lender loses the "Collateral" on a Mortgage Loan, CAN'T foreclose on the property, or hold the borrower liable, besides title insurance (which covers ONLY the full amount of the loan or "adjusted-rate" outstanding balance), WHAT ELSE do they use 2 at least come out even on the loan, so it won't be a complete write-off?? And I'm certain that a Deceptive Lender like the now-defunct Countrywide would have proactively found a way to make a bit of a profit as well, in the event they had to utilize this "Plan B".

[AFFA]

I wish to inform you that to satisfy the loan dues, the lender will go after all the assets of the debtor and the guarantor of the loan. The lender may garnish the wages and put a lien on the assets of the debtor and guarantor of the loan. The lender will take all possible steps to safeguard the financial interest of the lender.

AFF

[Friend In Court]

Originally Posted by dkwemn In the Rare-Event that a lender loses the "Collateral" on a Mortgage Loan, CAN'T foreclose on the property, or hold the borrower liable, besides title insurance (which covers ONLY the full amount of the loan or "adjusted-rate" outstanding balance), WHAT ELSE do they use 2 at least come out even on the loan, so it won't be a complete write-off?? And I'm certain that a Deceptive Lender like the now-defunct Countrywide would have proactively found a way to make a bit of a profit as well, in the event they had to utilize this "Plan B".

First, there is usually homeowner's insurance on the property which the lender would receive. Even when loans go into default and the mortgagor fails to pay the insurance, the lender keeps up the premiums on the insurance police.

Title insurance only insures the chain of title -- not condition or loss of the property.

The set of IF's you set out, like not being able to hold the borrower liable, rarely occur.

Many loans are insured by the government for deficiencies upon sale and can insure up to 80% of the loan value.