Bank of America and Short Sales- The Ugly Truth

Reblogger
Real Estate Agent with www.Search4MiamiHomes.com

Courtesy of my colleague Mark from Michigan... The Real Ugly Truth!

www.Search4MiamiHomes.com

Original content by Mark Wasserman

 

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.

 

Prudential HWWB, Realtors

Lynn Moss and Mark Wasserman

 

Lynn Moss   248-302-1530

Mark Wasserman  248-877-8548

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Comments (3)

Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Peter,  I had seen this once before and thought it explained a lot !  Also, some lenders make more servicing a non-performing loan than those who are not in default.  Thus, delaying a decision generates more money blah, blah, blah     Hope your Holiday Season is the best ever !

Dec 22, 2009 06:05 AM
Jennifer Grace
Elk Grove, CA
Jennifer Grace

Let me see if I understand you.

B of A gets a windfall if they short sale the property.

But B of A is slow to non-responsive?

If the FDIC was giving money to do short sales, I think it would be in the banks best interest to do as many short sales as they could before the end of the year so they can get their bonuses.

B of A is the largest debt servicer in the US.  That may have a bit to do with their slowness.

Dec 22, 2009 06:22 AM
Peter Fragos
www.Search4MiamiHomes.com - Aventura, FL

That truly does seem to make sense on paper that is... Speaking strictly for myself who has 12 units that are current short sales and 5 of which were recently completely rejected even though the comps support the offers I am dealing with people that just do not care about calling you back let alone anything else that is going on around them....

 

And thats my Ugly Truth coming from Miami, Florida...

 

Peter Fragos, PA

www.Search4MiamiHomes.com

Dec 22, 2009 09:33 AM