Can you feel sorry for banks, after they had a large influence in the foreclosure crisis a few years ago? Revealed recently, many banks pushed foreclosure filings forward without having proper documentation or receiving sufficient signatures. In fact, many whose homes had ended up in foreclosure might not have needed to go that far. But an article from a month ago in Bloomberg mentions that real estate loans have caused banks to have large quarterly losses. Should anyone be surprised?

Banks’ loaning practices have already gone through heavy reform, and getting a loan is far more difficult in the present than in 2005. Nevertheless, as the Bloomberg piece details, bank stocks saw notable drops this past quarter, with Regions Financial Corp., based in Alabama, being one of them. Regions Financial has not turned in an annual profit since 2007, and their shares fell 45 cents last quarter. Although the cause isn’t delved into, the author mentions that an increase in charge-offs from uncollectable loans, such as bad commercial real estate loans, might have spurred this drop. A takeover of the bank chain, which has already closed several branches, seems inevitable:

The mounting losses have made Regions the subject of takeover speculation, with Credit Suisse Group AG saying in a September report that the company is the biggest U.S. bank most likely to become a target of Canadian, Spanish or larger U.S. banks as industry consolidation accelerates.

Larger banks have halted foreclosures recently, and this action simply symbolizes the approach in the present to real estate loans. Instead of the swiftness to file foreclosure paperwork three years ago, banks need to wait, and the result of this may be a drop in profits that were once higher before the real estate crisis hit.

Several instances on this blog, we’ve discussed one of the results of lending practices and high property prices being foreclosure. But, since the market is in a better state than 2007, those who are now filing for foreclosures aren’t always filing because of an adjustable rate mortgage (ARM). While ARMs given to people who couldn’t afford the raising prices were one culprit in 2007, those who are filing for foreclosure are doing it for different reasons, according to a recent piece in the New York Times. The author follows a few couples in Florida regarding reasons why they filed for foreclosure instead of continuing to make monthly payments.

One couple, for example, decided to stop paying to help their failing business. The money that would have went to paying the mortgage instead went to advertising. But, as the article details, many file for foreclosure not only to help another aspect in their life but also because of lenders who don’t meet their needs.

Those interviewed in the article discuss lenders who wouldn’t help with adjusting their monthly payments, and the procedures, in general, end up being slow. Additionally, the crash of the real estate market resulted in properties being devalued. Many are still paying loans on properties that were worth more four years ago.

But, unlike getting evicted from an apartment, filing for foreclosure and being evicted is a far more drawn out process. The average time period, according to the New York Times article for an owner to be evicted is 438 days. This may end up being longer in some states due to judicial foreclosure procedures. As a result, the owner ends up living on a property, without making payments, for several months to over a year, waiting for the case to be resolved. During that time, the owner can make alternative living arrangements, either through renting or looking for a more affordable property.

Have you ever wondered what goes into foreclosure? Or why certain people sell their homes as a short sale and what REO means? As many properties sold on the market are foreclosures, knowing the steps of foreclosure are important if you’re considering purchasing a foreclosed or short sale property.

One term is pre-foreclosure. Most homes sold as a short sale are pre-foreclosure homes, as the owner is willing to settle for selling the property at a lesser value than what the home is worth to avoid foreclosure. A pre-foreclosure, out of the three options, can forestall damage to an owner’s credit, which results with a foreclosure, and before a lender gets involved, consultation on the lesser price of the home can be done with attorneys, accountants, and real estate agents.

Foreclosure is more of a common term used and pertains to any steps leading to an auction on a property. For those interested in auctions for a foreclosed home, often county clerk offices have listings – some of which can be found on email lists and notifications – of when foreclosed homes are going up for auction and the dates for viewing them. Although the procedure varies with states, foreclosure comes in two types, judicial and non-judicial. Judicial foreclosures involve mortgages instead of deeds of trusts and the process for a home to go up for auction takes longer. A non-judicial foreclosure, however, involves a trustee, or third party, who handles the process of foreclosure two to four months after the owner has defaulted on the home’s payments. A home will reach the auction block much quicker with a non-judicial foreclosure.

The third type of foreclosed home is a post-foreclosure. A post-foreclosure can simply be the new owner assuming the property or, if not sold at the auction, can be a property still in control of the lender, or an REO. An REO, although the property is still held by the lender, indicates that the property is the result of a poor lending decision that lead to overhead and losses. However, once the property is an REO, the lender must continue to maintain it and not leave it “as is.”