excerpts from WASHINGTON (MarketWatch) --
It seems Petrovich finally blew a gasket when a loan servicer (who shall remain nameless but is one of the nation's largest) "sat for months" on a short-sale application he had submitted on behalf of a client.
A short sale is when the lender agrees to let the borrower off the hook for the difference when a buyer isn't willing to pay as much as the borrower owes on the mortgage. In this case, the servicer -- the company which collects your payments, pays your property taxes and comes after you when you are late -- was working on behalf of the owner of the mortgage, which may or may not have been the original lender. These days, at least half of all loans are sold by lenders to investors worldwide.
Anyway, Petrovich, the author of "Fight Foreclosure: How to Cope with a Mortgage You Can't Pay, Negotiate with Your Bank, and Save Your Home" (John C. Wiley & Sons), had called the servicer weekly asking for updates. He also had to resubmit documents over and over again. And when he received an email asking for additional information, he'd finally had it.
He immediately resubmitted what was asked for, and the borrower sent in the required signatures two days later. In both cases, a call to confirm receipt of the required info was answered in the affirmative. Then, the bottom fell out.
"After sitting on the complete file since late May, early June, (the servicer) told the borrower the file had been closed due to failure to produce documents as required," Petrovich told me. "The servicer had all that was required within two days ... and it pulled the plug. This is unconscionable and despicable behavior!"
Later, when he calmed down a bit, Petrovich said the file was killed for one reason and one reason only -- the servicer knew he would resubmit. "If I sent in a new application, it could quickly approve the short sale and boast it completed a new short sale application within a short time," he said.
Petrovich, who has been doing short sales for more than 20 years, said he wanted to share this information because lenders, investors and the servicing companies which work for them are taking credit for helping troubled borrowers when, in fact, their efforts leave a lot to be desired.
"I worked on the lender side before I became a consumer advocate. I know how this works," he said, noting that this particular servicer isn't alone in how it handles requests for short sales or loan modifications.
"They run ragged the borrowers who are trying to do the right thing," he reported. "They intentionally lose files. And yet, we are repeatedly told how the lenders are trying to work with distressed homeowners. For the most part, and in my considerable experience, this simply isn't true."
Petrovich says the owners he works with "are on the edge of despair. They are led to believe if they jump through the hoops, all will be OK." But it isn't.
He maintains that loss-mitigation agents lie to owners about time frames, saying that they should have an answer within a week or so when in fact it will take, three, six, maybe even 12 weeks -- or more. Some want big bucks up front before they take any action. In the meantime, realty agents are trying to keep buyers on the hook as values plummet.
Because of this, Petrovich holds "little hope" for downtrodden owners who need affordable workouts to keep their homes. What these folks need, he says, is some bargaining power.
"Homeowners need teeth," the consumer advocate says. "That's why I now advocate forensic loan audits to determine if individual loans in foreclosure were predatory, or made or serviced in violation to state or federal lending laws. With some teeth, the homeowners can compel the lenders into more favorable workout terms."
Nationally syndicated columnist Lew Sichelman has been covering the housing market for 35 years.
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