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Short Sale Statistics - Lenders are giving themselves another black eye!

This is a short reprint of an article submitted to me from a short sale attorney in my area. Check out the statistics - it's unbelievable!

Short Sale Statistics: I recently became aware that in 2007 the lenders accepted approximately 43% of the short sales submitted. This was based on a test market of 500 short sales. In this test, the 285 REJECTIONS were NOT purchased by 3rd parties at the sherriff's sale. They all became REO's. Fifty of the 285 are still for sale and the other 235 were sold for purchase prices BELOW the previous short sale offers that were rejected.

foreclosure help There are many reasons for this total lack of common sense. They include, but are not limited to the following:

1) Lack of organization, manpower & experience in the loss mitigation departments.

2) Lack of authority & discretion by the negotiators.

3) Inaccurate BPO or appraisal information.

4) The offer is not properly considered, processed due to too many short sale applications & improper training of the negotiator. Many negotiators will not answer the question, "How long have you been a negotiator?".

So based on those statistics, how can we get more short sales processed in our favor?

When submitting your offer, plan for the above with as much background information as possible on your marketplace. Send your own BPO, do what it takes to get the short sale through.

Lyn Sims

Lyn Sims (847)230-7324 Email: LynSims@remax.net Website: www.LynSims.net

Lyn works the Northwest Suburban Chicago areas of Schaumburg, Hoffman Estates, Elk Grove, Medinah, Itasca, Bloomingdale, Carol Stream, Roselle, Streamwood, Hanover Park, Elgin, South Elgin, St. Charles, Bartlett.

Statistics courtesy of Gary Lundeen, Attorney, Short Sale Specialist (630)351-6560

Posted by Lyn Sims ~ Chicago Northwest Suburbs on 04/07/2008 03:16 PM

Comments (21)

SHORT SALES in the Real Estate Investing Channel

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Originally posted at: Real Estate Consumer Info.com: Short Sale Statistics - Lenders are giving themselves another black eye!

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21 Comments on Short Sale Statistics - Lenders are giving themselves another black eye!

APR

2008

wowzers, this is really good info. plus, i believe and agree with every word. I knew the banks were unlearned and not wise, but wow the numbers do say a lot. thank you. good day!

Man alive that's astounding. Surely things are going to trend towards Common Sense at some point.

Lyn

Like Forest Gump put it... "stupid is as stupdi does" I do lots of REO and I see it all the time. They may say no to an offer of X today, but accept X-$3500 next week. The assewt managers and all the people in the liquidation end are overworked, understaffed and overwhelmed.

Tre: I am thinkin' they are their own worst enemy.

Brian: Yup. Couldn't say it better myself.

A lot of these are getting approved because they are understaffed also. It can take a few weeks or a month just to ger a hold of the short sale negotiator too.

Most of these idiots can't get our of their own way. They refuse to empower their people to make wise business decisions, and in the end, it will cost them BILLIONS! I've also wrote about it fairly extensively here. Mortgage Company Mensas

Keep getting the word out, hopefully someone will listen.

APR

2008

The missing link is the PMI. A REO sale plus PMI (minus fees and overhead) is often times worth more than a short sale.

Banks only lend to those who don't need it when there is true need, and loan to anybody when there isn't. They also have the bad habit of being the most reasonable and flexible with those debtors who are in the worse shape and have the weakest loans.

In other words, those who followed sound advice, have good credit and some assets (cars, savings, retirement) and got a traditional loan with PMI instead of a subprime ARM are the most likely to be abused by the banks.

Josue: That's why I wanted to pass along the info to all. It's astonishing the trouble they've gotten themselves into. Incompetent all the way moves into unbelievable incompetance.

Dear ECB: Sorry I'm not gettin' your full comment. It is certainly true that "when you need" the money, the bank isn't going to give it to you. It is also true that borrowers with good credit numbers are put thru the wringer also for obscure things & underwriter whims. Thanks for your time & comment.

Bob, great post. I love the "mensas" part. It's like watching the "Tiddy Bowl" man in the boat, you know where this is going & it isn't going to be good! Let's swirl around for awhile & waste everyone's time, but we still know where this is going? Glug, glug. They don't seem to care or knowlegeable enough to "deal" with the problems that they created.

APR

2008

Mike: Sorry I missed your comment, "understaffed" is an understatement!

APR

2008

Doing your homework up front is a must. Lack of manpower is a huge issue.

Thanks Velda for the comment. Lack of manpower is a big issue as you've said. Doing your homework helps you get the deal through.

Lyn, your point is right on the mark, the lack of attention given these short-sale and loss mit. situations is incredible. One point I'd like to make, though, because many people are not aware of it: The entity people think of as "the lender" is often not the owner of the loan and may not have any say so in the situation at all. I answered a question on another forum recently which went pretty much like this, "We're involved in a short sale and Bank of America said everything was OK; now they say they have to get approval from Fannie Mae. What's that all about?" The answer to her question, and my point here, is that the company to whom someone made their application and to whom the borrower makes their payments may not be the company who owns the loan. A company may be on the initial paperwork, and they may be collecting the payments, but the loan itself may have been sold a dozen times with no one knowing any better. It's no excuse for the way things get handled -- just another layer of BS to deal with in the whole mess.

Juan: You make a great point, somewhere down the chain of command you find the person who CAN make the decisions. Sometimes alot of time is already wasted before you do come in contact with that important person. Sad state of affairs that things are so bungled and complicated. Thanks for adding your point of view.

MAY

2008

The worst is yet to come. I have been a real estate agent for 8 years in Sacramento. What the lenders have done has been with a wreckless disregard for the consequences of the acts. Adjustable loans with an introductory teaser rate, using stated income criteria is synonymous with WILFUL BLINDNESS which is a legal term for putting oneself in a position to avoid either criminal or civil liability. For the past few years lenders have been lathering up the market with these loan products in a greedy attempt to increase profits. The net result is that when these mortgages, which were originally rooted in Subprime, began to reset it became evident that the borrower who was initially qualified at the teaser rate was unable to meet the mortgage payments. Instead of the lenders dealing with the problem at that initial level, they chose to foreclose on a massive scale. Prices plummeted downward taking all the values of the surrounding properties because the subprime borrowers were demographically dispersed over most areas. They took down the values of the innocent as well as their own properties that where in proximate locations. Lenders took writedowns of billions of dollars and many went out of business taking investors with them. Life savings were wiped out all most over night. Pensions funds contracted in value just before baby boomers are about to retire. Real estate agents like myself were impacted severely because not only their property but their income was attacked. Many people don't realize that the note and loan agreement they sign at escrow(which is probably the first time they see the documents) contain a provision where you irrevocably assign your right to the property with a power of sale upon your default for non payment. This means they can sell your property from under you without taking you to court. As yet two case that have come up to the Ninth Circuit court of Appeal failed to state facts sufficient to state a cause of action. The courts ruled the validity of these non judicial foreclosures. They did not rule that under "no set of facts" non-judicial foreclosure would be held valid. My perspective is that if it is a National Bank(a federally chartered bank) and the plaintiff stated the facts correctly, it would be considered a deprivation of due process as applied. The lenders should have done the adjustable loans with stated income. They Willfully Blinded themselves. They could have lowered the interest rate to keep the homeowners but they chose to foreclose and affect everybodies property and damage the economy. The government has made insipid attempts to correct but they do nothing. The 800 hope number they tout simply tells you to deal with the lender. The lenders dont deal with you. Foreclosures and short sales are on the rise and if anyone wants to know what the 1929 Depression was like they may soon find out. It aint pretty.

Thanks Reuben for your additional observations. A few more points that others might not have thought about.

Lyn... It is really getting rough in Michigan these days... sa Hi to my buddy, Ron Wexler for me.

MAY

2008

John & Lisa: I have heard that Michigan has it tough all the way around. Good Luck! Haven't seen Ron Wexler since a Mike Ferry Event, or possibly when Tom Ferry was here in Bloomingdale with his new company.

JAN

Ya.. i lost a client because of the short sale fiasco....
The short sale was priced at $364,000..sent in offer above the listing price....clients offer was passed because another offer was accepted.....month later the house was back on the market as a short sales for the same listing price....sent contract to client for a price above the lsiting price (again)......my nonprofesional client who has the internet and thinks he is a realtor now....w/o my knowledge was using another real estate agent....during that time the house listed as a R.E.O. for $308,000...now the wanna be agent client blamed me for the fact the banks are playing games,..turning down shortsale offers and listing for less money as a R.E.O.....sounds like congress huh?..banks turning down offers and then listing for less than the offers that wre sent in.....i am not getting it..but it lost me a client....