Another Bank Loophole?

It looks like the banks have done it again!  They have found a new way to screw the homeowner in default.  I sometimes wonder how the people making these decisions sleep at night, but it’s not my place to judge one way or the other.  All I can do is get the message out about what really goes on behind the scenes in our day-to-day dealings with short sales.

We have a file that has been under contract for quite some time now where the first lien holder has approved the purchase price and is willing to take the loss on the books.  The second has been a bit trickier and has pushed back a bit, but today the river card was thrown on the table and they went all in.  GMAC is owed $50,000 on this second mortgage and they will take no less than ¢.30 on the dollar ($15,000).  The investor’s rationale is that he can sell the note to a collection agency for $15,000, write the loss off on the books and be free and clear of any attorney’s fees and court costs associated with a foreclosure.  The first mortgage has offered the 2^nd $3,000 to clear the title and settle the account and the total loss to the first would be around $100,000.

So how are we handling this?  Well we have gone back to the first and asked that they take a bigger loss and to offer more to the 2^nd.  We have offered a reduction in our commission from 3%, down to 1% to hopefully show good faith, and finally have asked the buyer is she will be able to raise her offer a little bit in order to help the first lien holder recoup some of the loss.  Hopefully everyone chipping in a bit will help this bank investor see the light and see that we are trying to help this homeowner out of a foreclosure and now a possible bankruptcy and to take one of the millions of foreclosures off the books.

I really hope this doesn’t become the norm.  And besides, are the collection agencies really going to start buying up all this debt that they won’t be able to collect on.  Who is going to bail them out?  I certainly hope they don’t expect a bailout from the American Taxpayer.

I don’t think that anything will help though.  I’m not trying to be pessimistic, but having dealt with short sales and the people behind them for over two years now, I continue to lose my faith in the good of man, or at least in the good of the men and woman working at the banks.  It is unfortunate that I even have to write this post, but this is the stuff that really happens every day with banks, not the nice commercials that talk about how banks are here to help you with your problems.  The reality is that they don’t care about the problems of Americans; they only care about the problems of their shareholders and their wallets.

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