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Understanding Stubborn Banks

Understanding Stubborn Banks! Stubborn Banks are accepting short sale offers yet often only throwing a $3,000 to $5,000 bone to the secondary lender, citing it's there policy. This of course often kills a short sales, when the secondary lender refuses to take less than $5,000 or what ever citing it's there policy.

OH MY! The First Bank won't allow any more to go to the second. The Second Lender won't take any less! Worse! The amounts involved are often a mire pittance!

If the seller can afford the difference the Bank wants it. If the Buyer is willing to pay more the Bank wants that money, too!

Why? Why would a Bank risk further losses over as little as $2,000? Why would the Bank be so stubborn?

Let's start with why a Bank would accept a short sale? The first reason and most important reason a Bank accepts a short sale is because they see it as in their best interest! They could care less how you as a debtor or REALTOR® see it, they answer to their stockholders and regulators not the debtors or entitlement mobs! The second reason is pragmatic, if the debtor's condition has substantially and uncontrollably changed! That's the reason for the "Hardship letters" the debtor must acceptably explain his position, "I quite my job I don't want to work any more" or "you got Federal "bail out" money so I'm entitled" won't get you a short settlement with any Bank!

So why won't they allow a reasonable amount to go to the second lender? Because, they see the second as creating the problems! Especially cash out seconds that are so common! The Bank made a safe or an insured loan to a qualified applicant then along comes a secondary Lender who loans the Debtor even more money, with little or no improvement in the debtor's financial position! Simply put the Bank sees the secondary lender as greatly responsible for the debtor's problems and worse the National problem. Often ignoring the fact that they may have originated the second, except when they still own the second!

From the Bank's position money going to the secondary lender is like paying Bonnie and Clyde to only rob you on Tuesdays, Wednesdays, or Thursdays because they have large deposits on Mondays and bring in lots of cash on Fridays to cash checks! They're pragmatic enough to pay a little because if they've accepted a short sale they believe it's saving them money, but see the payments to the second Lender as extortion!

I have a solution for some! Watch for it.

Bill

William J Archambault Jr

The Real Estate Investment Institute

wja@reii.org 832-259-7078 or 702-516-1569

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From my past: GRI 1975, FLI 1974, Catalyst from a client 1974 an agent that makes things happen, REII, The Real Estate Investment Institute 1995.

©William J Archambault Jr ©The Real Estate Investment Institute ©REII

Posted by William J Archambault Jr on 09/24/2009 04:33 PM

Comments (11)

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stubborn banks, short sales

Originally posted at: The Real Estate Sage at The Real Estate Investment Institute - REII: Understanding Stubborn Banks

This post has been included in Nevada Information
Post is included in group: The Ninety-ninth Percentile
Post is included in group: Silent Majority
Post is included in group: Short Sales and Forclosures ONLY
Post is included in group: Short Sale REALTORS®
Post is included in group: Home & Credit Savvy

11 Comments on Understanding Stubborn Banks

SEP

Bill - That is an interesting and insightful theory. The other reason might be that most junior liens accept the $3000. Not all though!

Wendy,

I'm only writing about the stubborn ones! In both positions!

$3,000 is better than nothing. If foreclosure is pending the second lien holders has three choices: They ether settle before hand, pay the first, or get nothing. (You know that, but this is a public post.)

Bill

William, now that you have peaked my interest, I will be looking forward to reading you solution.

Bill, you've said it quite well here. I was once with a corporation that was run by accountants (kinda like bankers I guess), and to them, there were no people on the bottom-line -- just numbers and their bonus at stake to make better numbers. John

George,

My solution will only work for some. But, unlike much that's been offered it's totally legal.

Bill

John, Kathryn,

I was a loan officer at a billion dollar bank when that was huge, but it was owned by one family and 80% of the stock was owned one man! So I've never been in that cold position.

I think most of our problems are because of goverment involvement has forced our community business out of the community.

Bill

Bill,

It would be interesting to read. I agree with what you said here. The problem we see is with Sellers who can't come up with any money, so they will not be able to short sell when the second wants more than $3K that the first is offering the second.

I donot know if what we do in this case is the best solution, but we are simply trying to get the property for less money tha the Buyer is willing to pay while making a verbal arrangkent that they would take upon themselves paying up to certain amount if it is required by the second.

This was sometimes $3,000 saves the deal.

It is funny, but with a $300K deal it is easier to get the first to agree to $280K on the offer, and this way the Buyer is agreeing to pay for up to $20K.

Jon,

From what I'm seeing if the buyer is willing to pay $20,000 more the first lien holder is going to want it! And, rightfully so!

Bill

SEP

Bill - I am awaiting your "legal" solution as well. ;)

Jon is correct when he says "It is funny, but with a $300K deal it is easier to get the first to agree to $280K on the offer, and this way the Buyer is agreeing to pay for up to $20K."

That is my core strategy in short sales that make mine work and profitable.

SEP

Nice theory William, I hadn't thought of all it before.

The fidicuary to the shareholders and the fact that it is usually the 2nd that made them go upside down.

In that case wonder why 2nds' are so hard to deal with? After all they gave the loan.

See it all the time in Michigan.

Missy,

The theory explains allot of situations, but not all.

Seconds are so hard to deal with because they are going to lose almost everything. Nether lender set out to lose money nor despite my implication are they responsible.

Michigan's problems are a century of promiscuous voting.

Bill

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