The Making of a Short Sale--Lender Excesses Which Are Never Properly Examined

As many of you know,one of my sub-specialties has become representing Borrowers behind in their mortgages in their dealings with Lenders. Normally, what I do is have my clients sign an authorization which permits me to gather information and negotiate. It is something that I did not anticipate doing with as much regularity as I experiencing today, but I do get satisfaction when I am able to define my client's situation with the Lender and develop a short sale scenario which works for both sides.

Today, I interviewed a client who is three months behind in his mortgage, and will not be able to catch up. To make matters worse, his home is worth probaly ninety thousand dollars less than the pricipal amount of his mortgage. To me he is an excellent candidate for a short sale, and I am in the process of developing information to submit to the Lender at such time as we obtain an Offer to Purchase on the property.

As part of my due diligence, I perform a "Owner Search", so-called, on the property to confirm that my client is,in fact, the Owner and that there are no other liens or attachments, of record, which would prohibit a short sale ,once it is approved. These were the results of my Owner Search:

     1. The property was purchased on January 12, 2004 for a purchase price of $167,750.00

     2. My client refinanced the mortgage loan on the property on December 5, 2008 with a mortgage of $268,620.

To me, the time of purchase and refinance, as well as the amounts in question, call into question the bona fides of the mortgage lender who made the refinance loan. The five years between 2004 and the end of 2008 were not years when property values were rising. In fact, if you recall, December, 2008 was a rather grim time in our financial history after the collapse of the House of Lehman.

My cient has indicated that he did not hit a lottery jackpot, or experience a severe increas in his pay, in December, 2008. Yet, he was able to take out a mortgage loan which involved receiving cash refinancing proceeds at that precarious time. It is not an accident that he is now "under-water" in his current mortgage. It should not have been given to him in the first place.

I would like to look at the 2008 Appraisal. I would like to see the Loan Application which accompanied the file. The mortgage lender, who shall remain nameless, does a lot of radio advertising. I am sure that was the source of this loan.

Bottom line, this will be a short-sale, where the current Lender will take a huge hit. If a Lender takes a hit, we all suffer. I am disgusted with situations like this. I am sure they are not isolated. Unless and until we root out mortgage lenders who behave in this manner, we will never have the real estate recovery we all need. The mortgage lender who made this loan continues to make mortgage loans, and advertise, in Massachusetts. That is indeed, unfortunate.