Courtesy of my colleague Mark from Michigan... The Real Ugly Truth!
Having dealt with B of A on several short sales, and being totally unsuccessful on any. I received an email todayabout the truth of short sales and B of A. My thanks to John H Grant for this information.
If you have dealt with B of A, and you have found them slow to respond to you with short sales, or even taking the position "don't call us , we'll call you. Here is the scoop.
B of A is part of the FDIC's loss sharing program with lenders. The program works like this...
Bank "X" goes under and is taken over by the FDIC. Another bank, let's call them B of A, steps in to buy bank "x"s assets. B of A pays 50% of the value of the assets and the FDIC covers the other 50%. Now let's say that one of the loans in the asset package goes into default This can be resolved by either someone doing a short sale on the loan and selling the property or foreclosing and sale of the security on the loan. When this happens te FDIC will pay B of A 80% of their loan which is based on the origianl face value of the note, not the purchase value. How about analyzing the numbers?
B of A buys the 100K note from bank "x" for 50K, The FDIC puts up the other 50K. The note goes into default. A short sale is finalized and B of A gets 50K. All is well.....WRONG!!
According to the FDIC they will pay 80% if B of A's loss based on the original value of the loan.
B of A will get 80% of the 50K that the FDIC payed , that's 40K. Plus the original 50K that B of A put up. So the bottom line is that B of A will receive 50K plus 40K on the 50K they put up.
A $40,000 windfall. Where's the motivation for them to do a short sale????
Oh, who has very healty profits thanks to this. I'll give you one guess.