Two months ago a friend of my wife and I called us to ask for our help. She knows that we have been selling Real Estate for 31 years, and have a vast experience in many areas of our profession. She confessed to us that she was in arrears with Countrywide Mortgage, and had fallen behind on two payments.
She wanted to explore the possibilities of a short sale. Like millions of people, her duplex was worth less than the amount she owed. She did not know what to do and needed our advise.
I made an appointment with her at her duplex, to see the condition of the property. The front unit was in very bad shape. A non-permitted studio was also in bad shape. The small home in the back, where she lived with her three children was very nice. She had given me the address previously , so I came prepared with the last 6 months of sales in the area. It did not take a genius to figure out that the property could not be sold for the amount she owed, and had to be sold for substantially less.
The alternative of a regular sale was out of the question, since she did not have the money to cover the difference between the sales proceed and the mortgage she owed. A short sale, a deed in lieu of foreclosure or a bankruptcy were the only terrible alternatives left for her. To make things worst, at the time, the "Mortgage Forgiveness Relief Act of 2007" had not been signed, so I was careful enough to inform her that the bill had not been signed yet, and if she went for a short sale, she could be hit with a Federal Tax on the forgiven debt. Obviously, she was very distressed at all the alternatives. The only good news is that Countrywide had not filed a notice of default yet.
I also informed her of the recommendations that President Bush had given to Lenders, regarding cooperation with people in arrears and his strong advise that Lenders should work out with borrowers that were having a hard time making their payments. We did not resolve anything at the time, but my friend told me she was going to think of all the different alternatives and would get back with me.
Two months later we spoke again, and she informed me that she had decided to put all her energy in fixing the front house and the studio above and rent them out. She was proud that both units looked fabulous, and that she had been able to rent them out right away. She also told me she had gotten a better job and she would be in the position of making her full payment again starting in January 2008, but she needed my advise on how to obtain an agreement with Countrywide for a "loan modification". I told her that she should call the "Loss Mitigation Department" of Countrywide and speak with a "workout negotiator", explain to them that she was now in the position to make her regular payments, but she needed the payments in arrears, to be added to the principal, because she was not in the position to come up with these payments, since she was the only support of her three children and had no assets but her property.
Theoretically, she was saving Countrywide a lot of money, since she was not asking for a short sale or she did not want to be foreclosed or file for bankruptcy. She was not asking for any discount either. Her only request was that the amounts she owed, including expenses, be added to the principal balance and re-amortized if Countrywide preferred. To my eyes, the perfect scenario for a "loan modification".
After calling Countrywide many times, she was put in touch with a "workout negotiator" that heard, that she was a single mother of three children, that she did not have any assets, but that now, because of her new job and because she had rented out her front unit and the studio above, she was now in the position to start making payments right away.
The workout negotiator of Countrywide told her he was going to check her case out, and would call her back. Knowing the bad reputation of Countrywide I was worried when she told me that the man from Countrywide had not called her back again. I told her to insist and call them as many times as needed to get in touch with the negotiator. Today, she emailed me that when she called again, Countrywide informed her that they were foreclosing on her property in 15 days.
So much for the recommendations of President Bush. Countrywide prefers to take the heavy loses of a foreclosure instead of accommodating a borrower in distress that is willing to make her payments. All the effort my friend put in fixing her duplex and spending many hours away from her children to receive this kind of response.
I am angry with Countrywide because they are very hard to work with. The decisions that they take are irrational. Many of my clients have had problems with them. The worst is that the CEO of Countrywide is probably retiring with a 110 Million dollar retirement package for the " good work" he did. I certainly expect Bank of America to do a better job.
Since we are the bloodline of lenders we should be tougher on them when situations like this arise. We should only work with fair lenders. Personally, I have had very good relations with Bank of America. I certainly hope that they have more brains than Countrywide.
Isaac Bensussen-www.besthomesinlajolla.com
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