Guess What? IndyMac (now One West Bank) & BofA WOULD RATHER FORECLOSE!

GUESS WHAT?  INDYMAC (NOW ONE WEST BANK) & BOFA  WOULD RATHER FORECLOSE!

For the past several months, we, as agents who have taken on short sale listings, have been able to tell potential clients, "Your lender doesn't want your home back. They would much rather work with you on a short sale".

Well folks, I'm here today to tell you that you should pause before making this assertion.

Fellow CDPE (and AR Member) Sidney Jimenez has written several blogs lately about the strong-arm tactics that lenders have been taking in recent weeks/months.  I would highly recommend you read them here, and you will get an even better idea of what these two particular lenders are doing to homeowners (the same ones that bailed them out with their hard-earned tax dollars).

Case In Point:

I took on a listing in May/2009 for a couple who were going through a divorce, with 3 children.  The husband, after suffering a serious accident, had been unemployed for the past two years, and the wife's income was cut almost in half at her job of 10+ years.  First, they tried to do a Loan Modification.  Up to the point of missing their first payment June 1st, they had exhausted everything they had (savings, 401(k), etc.) in order to keep making their house payments.  Their backs against the wall, going through a divorce, they finally could not make their payment.  Instead of just walking away, they thought they would try to salvage their credit and increase the bottom line to the lender by proceeding with a short sale.

IndyMac was in 1st position with a loan amount of $478,000.00

BofA was in 2nd position with a loan amount of $41,000.00

After 30 days of having it listed on MLS, we received an offer of $275,000.  The BPO came in a week later (ordered by IndyMac) at the purchase price of $275,000.  I found this out yesterday from the "supervisor" at IndyMac.

On the HUD 1, we instructed the Title Company to give BofA $13,000, and the remaining balance to IndyMac (after closing costs and commissions).  So, IndyMac would net $241,000 on the deal (slightly more than half of what was owed).

BofA said they would take the $13,000, but only if my client agreed to pay the remaining deficiency of $28,000 through a promissory note.  Note, in AZ, BofA can obtain a judgement at a later date, as this was a HELOC.

IndyMac, on the other hand, came back with the following:

They would accept the $241,000, but only if my client signed a promissory note for $75,000, payable over 10 years, at 0% interest.  Plus, they would only accept a payment to BofA of $3,000, not $13,000.

Here is the funny part...Well, not funny, but....

Arizona has what is called the Arizona Anti-Deficiency Judgement Statute, which does not allow a lender in 1st position to obtain a judgement for a deficiency on a first mortgage, or a second mortgage if it is "purchase money".  Obviously, the HELOC doesn't fall under this statute, but the 1st mortgage does.  I explained this in detail, on more than one occasion to the IndyMac "supervisor" that this case was escalated to.

After talking to her "VP", this is the response I received today:

Bob,

"I have spoke with upper management and we are not going to wave the promissory note as a condition of the approval.  If the borrower is not willing to sign that then we will proceed with foreclosure.  Thank You".

So, IndyMac now gets the house back, and my client becomes yet another foreclosure statistic.  The home has decreased in value (now worth about $260,000), and will continue to decrease until they finally sell it.  IndyMac still has not filed a Notice of Trustee Sale.  Once they decide to do this, my client will have 3 months to stay in the home until the sale takes place.

So, let's say they file the notice at the end of September (he as until then to respond to their "offer").  That means he gets to stay in the home until January 1st, 2010.

Then, let's say they put the home on the market February 1, 2010 as an REO Listing, and it takes 90 days to market and close the transaction.  

Getting the picture now?  Instead of getting their $1,200/month mortgage payment ($14,400) over the course of the year that they should have been getting, they get NOTHING.  Tack on another $800 per month for general maintenance, taxes, and utilities, and that number now climbs to $24,000.  

On top of all that, the house is worth about $260,000 today.  They will be lucky to get it sold for $240,000 as an REO in February 2010.  

The bottom line is this:

If IndyMac takes the short sale today, they net $241,000

By foreclosing, they are LUCKY to net $200,000

But then again, do you think IndyMac (now One West Bank) or BofA cares? 

Do you think that if they take back enough homes that they will finally learn their lesson?

Heck No!  After all, when they go bankrupt again, they simply have to pick up the phone and call THE MESSIAH for another BAILOUT!

So folks, the purpose of this post....

Before taking on a BofA or IndyMac short sale, THINK AGAIN!  While we all love to help homeowners who are distressed, WE CAN'T WASTE OUR TIME WORKING WITH LENDERS WHO WOULD RATHER FORECLOSE ON HOMES THAN WORK THROUGH THE SHORT SALE PROCESS.

One question to all of the AR Members...AM I THE ONLY ONE EXPERIENCING THIS IN THE LAST 4-6 WEEKS?