Even Real Estate Professionals Experience Foreclosures
Ok, so the desk is littered with papers and tissue. It looks like an F5 tornado hit my office after having spent hours and days begging, pleading, the Federal National Mortgage Association (FNMA 0r "Fannie Mae" for short) to give our buyer more time after the bank, Wells Fargo, approved the short sale on my client's home! From the date of short sale approval from Wells Fargo to the actual auction/foreclosure date...we were only given 3 days. No postponement...not a cash buyer for the home...it....is....over.
A cash investor wins the auction bid for LESS than our buyer are willing to pay to buy this home.
Her story is much like any other in our economy today. She's laid off from a major telecommunications company, can't find work, has a small pension she receives and can't find work to support the mortgage payment. Family chip in to help, till they can't any more, so rather than face the sting of "foreclosure" she hires a professional, a CDPE, one who's worked for the largest banking institutions as a Mortgage Loan Officer, who understands the process; she hires me.
It was 162 days ago. We sat down to discuss for the first time about how her short sale would be handled. We went over the standard Colorado contracts and disclosures as well as disclosures about the uncertainty of short sales. We discussed the electronic lockbox I use to protect her home from would be intruders that over 95% of other agents in the area DO NOT use (a hot button of mine). How we market her home to over 5300 websites, online sources and print advertising and how RE/MAX Professionals sales homes to other agents so that we can remain the best in class for our industry. After talking about social media, youtube videos of the home, she's heard enough and is ready to get things going.
Being in the mortgage industry for banks like BB&T, Wells Fargo, Chase and First Horizon (now MetLife Home Loans) one would imagine that I would have an excellent grasp of the industry and that watching my efforts fall on deaf ears, wouldn't happen...right??
Let me explain how mortgages work, in case you missed this lesson from your mortgage loan officer when he was watching your eyes glaze over after too much documentation.
First you get a loan and buy a home! - yay!
· At the closing table, you sign documents called "The Note" and "The Deed of Trust". These two items are your promise to pay the bank (you think) the amount they're giving you to buy the home. Not necessarily so. You're paying an INVESTOR.
After you're done signing your next 15 to 30 years away to the bank, things get...eh....interesting.
· Your mortgage paperwork is processed and since the bank, bless their hearts, needs to re-loan money out to someone else needing a home, your promise to pay becomes a "Mortgage Backed Security"
· A government entity like the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) packages your loan with thousands more, I've heard literally, on pallets to be sold by bulk to investors here and abroad. (Many had and are still being sold to the Chinese.)
· THE BANK you signed your life to retains the "customer service" portion of your loan.
o They collect your money
o They have those cute online access sites for you
o Send you those monthly payment reminders
o Talk to you when you complain about your bill going to the wrong address
o Pay your taxes and insurance held in their interest bearing Escrow account from that portion of your mortgage bill
o Pay the investor the rest after their take of your mortgage payment.
So, what happens with that investor who buys a mortgage backed security? What's their 'security' that you'll actually pay the mortgage payment? Somewhere down the line, either Fannie Mae or the Investor takes out a insurance policy (a mortgage insurance policy) on you. If you default, they want to make sure they recoup as much as possible to 100% they paid the bank, the bank you signed the mortgage with, of their monies back, just in case.
So why do I care?
As in the case of my client, you care because you want to short sale your house! Remember a FORECLOSURE is a PUBLIC RECORD on your credit for the next 7 years! Short Sales are NOT a matter of public record...nope...not at all. Ain't nobody's business except your own. Let me give you what you need to know when deciding to short sale your home:
Here's the scoop:
1. We put your home on the market
2. We market your home, everywhere...from Bangor, Maine to Bangkok.
3. We get a buyer! Yay. Sure, he's offered 30% less than the asking price...but hey...you're going to FORE-CLO-SURE (for sure) if we don't put something before the banks eyes!
4. We send your mortgage company or companies a COMPLETE PACKAGE (very important and the reason for hiring a CDPE (Certified Distressed Property Expert)! This is what that specific bank wants to see, in their own documentation. Yes, I have that, does your Realtor®?
5. The bank (servicing lender) sends the documentation to a Short Sale Processor
6. The Short Sale Processor evaluates the file for completeness. (The file I sent them, the client I'm speaking of right now, was extraordinarily clean!) They then send the file to a "Negotiator"
7. The Negotiator is the liaison between the bank, the Real Estate Agent, and the investor.
8. The Negotiator evaluates the file and either sends it direct to the investor or to the Audit department to ensure it meets initial standards - that they're getting paid what they will accept or choosing to deny the short sale right there.
9. If accepted by audit, the file/request for short sale is sent to the investor.
10. The investor, being the savvy guys they are...send it to their attorneys
11. Their attorneys send it to the mortgage insurance company to ensure repayment of the deficit (the amount of your present principal balance minus this offer we've sent them) plus legal fees and so forth....
12. The Insurance company (Radian, MGIC and other investment insurance providers and hedge fund managers) evaluate the offer and decide to see if this is an insurable case. They're looking into you Mrs. Seller... "Do you really have a hardship so that you must sell your home??" Do they really have to pay Mr. Investor back your deficit you've {not the economy} have created??
13. Once they have pity on your situation, and determine the payout is less than allowing your home to go to foreclosure, they approve it. It now goes back to the Investor's Attorneys.
14. From the Attorneys it goes back to the Investor
15. From the Investor, back to the Negotiator
16. From the Negotiator back to me....you're trusted Real Estate Professional.
17. And...we start the loan process to go to closing.
Whew!! Right?? Now imagine this is a 1st and 2nd mortgage?? The whole process must be done, exactly as above, for both lenders.
So, what happened??? Why is my home I've worked so hard on, why is it going to foreclosure today??? You're the expert Clinton; you should know, right!
There are factors of any short sale we as agents cannot put a finger on: the decisions made, for whatever strange, bizarre reason, from the Investors, their attorneys, and the mortgage insurance companies or hedge fund managers. As in my begging Fannie Mae you never know what motivates their decision to accept an offer, reject an offer and allow it to go to foreclosure. I side with the banks, only in this case, that if an investor is involved, it is most likely not the banks fault your home went to foreclosure.
In my case, the servicing bank according to their own internal guidelines, accepted our buyer's offer and gave us short sale acceptance. The investor who actually owns the mortgage backed security for this home, Fannie Mae and/or those investors who had purchased Fannie Mae Mortgage Backed Securities, made an internal decision to only postpone my foreclosure 2 days from Short Sale Acceptance. Basically...it seems, they wanted the home to go to foreclosure. And their opening bid this morning? $10,300 LESS than the offer accepted by the servicing bank. Another private investor outbid their published bid by $1; much less than the amount owed to them, and less than the offer submitted.
The buyer that we've had under contract....was not purchasing the home with cash and could not close in their two day allowance. What were they thinking? It's anyone's guess.
The key to short sales is that there are no guarantees. If you're in a situation where a foreclosure is imminent, and you know you couldn't afford a loan modification if you received one, call a professional. Seek someone who has completed the training and earned their Certified Distressed Property Expert designation and who handles and negotiates for you. Remember, in most cases, you won't be paying anything for their services so you have nothing to lose and the ability to regain your credit back, quickly.
If you're in the Denver, Colorado area, or just need to talk to someone, call me. I work 9 to 9 mountain standard time. My name is Clinton Porter and my number is 720-876-8544.
Thank you!
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