The biggest american bank - the Bank of America is found in Charlotte, N.C.. Almost everybody knows about Countrywide Financial - the financial institution that took a loan of around four billions american dollars, and finally created a basics for a mortgage crisis.

It is important to mention, that this acquisition let the BofA have its own part in 25% of home loans in the United States. The transaction described above is just one example out of millions of cases, when organisation wins huge advantages after financing problem loans. Such kind of loans are also called subprime loans, of course this situation attracted a lot of attention, all problem lenders were checked. Normally as a source of money for mortgages banks use the money saved on deposit accounts by clients. But Countrywide Financial works according the different scheme, it borrows money on the Wall Street, so it gets amount of money enough to invest it in mortgages, and finally sell these loans on mortgage market. These transactions are held over and over, which enables the investors and borrowers get their profit. This scheme worked great until we faced the mortgage crisis. After becoming the owner of Countrywide Financial the Bank of America received in its property around 5800 branches located in 31 different states in US.

More over Bank of America unites 700 loan offices and 200 banking centres located all over the United States of America. Taking into consideration that a lot of borrowers loose their homes at the end, this acquisition is very profitable operation for Countrywide Financial executives. The next step of BofA will give a possibility around 260 thousand borrowers with problem loans keep their real estate. it will happen due to modifying more then 40 billion US dollars of mortgages. All this is planned to to be held during the upcoming two years. A number of clients with problem loans results into increase of Countrywide REO amount.

Post foreclosures (REO)

REO property or real estate owned property belongs to banks. How does it happen that banks own a real estate? Well, it is easy to understand: bank gives a loan, so mortgage appears, if client cant pay his dept and if there are no ways of foreclosure avoiding, the house becomes the property of financial organization. It may seem that foreclosures can’t bring high profits as bank want to sell it offering the price which will at least cover the amount of the first loan. On the other hand, if you will be more attentive, you will see some ways to benefit greatly from buying a foreclosure house.

It may be the situation, when more then one loan is secured to the real estate; actually it happens quite often nowadays. In case second lender doesn’t make payments to the first lender and starts own foreclosure procedure, in this case the second lender is not part of foreclosure process any more. That is the main reason why plenty of second mortgages are valued around 20% less then the normal market price.

• Largest foreclosure lenders:
• FannieMae foreclosed homes
• Freddie Mac REO homes
• Contrywide foreclosure properties
• BofA Foreclosures
• Fifth Third Bank REOs

Bank doesn’t benefit from being an owner of a house; it needs money to flow constantly to get higher net profit. More over keeping a foreclosure as an asset may cause additional expenses. That is why bank wants to sell this burden as soon as possible, and it is likely to accept even not high price, just to cover the dept.