Deliberate Foreclosure or Lack of Competence During Short Sale Process????

Sometimes it is more profitable to foreclose on a property.  Sometimes they are understaffed in the short sale division.

 

It makes no sense--- but sometimes they go that route. 

-Jason

Some lenders are playing roulette with the homes, Stella, because of the volatility of the market and the unhealthy economic climate. They play the home like a poker chip. Lenders routinely turn down short sales which nearly pay off the mortgages with priority because they want to gamble with the house on the court house steps at the foreclosure auction, especially in a good environment for investors, like Memphis. I recently saw this happen. The lender lost 25 thousand at the foreclosure sale because they refused a cash offer which would have been within ten thousand of the payoff on the 1st. The second only had about twenty. Everybody lost because of the lenders imbecilic decision, and probably because of the sweatshop managers bad decision to put an inexperienced person, possibly with a bad attitude on the phone. Thanks for your post. Good questions surface.

My favorite is when they tell the occupant to make a few more payments -- and they will then work on the short sale.  Then make just a few more payments-- -- Then whoops -- Sorry, it's too late to do anything.

 

-Jason

My heartfelt sympathies go out to you and your client. That is such a shameful tragedy that could have been avoided, and what's worse is that this is not an isolated case.  You would think the lenders would have learned their lesson regarding making bad business decisions since they are largely responsible for the majority of the foreclosures we are seeing today (via making too many risky loans in the first place). 

While your case was not necessarily related to a bad loan (since there was a medical hardship involved), the excuse that contributed to the lenders' lack of action was a direct result of the fact that they are dealing with a tidal wave of other foreclosure cases that DID result from bad loans.  That said, I don't blame the lenders solely.  I absolutely realize that the hurting economy has also contributed greatly to this crisis, and even some of the Realtors (at least the ones who didn't discourage their clients from taking loans they should have known would be too hard for them to repay in the name of making a sale) have to be held accountable on this issue. But, those excuses are simply not acceptable for the current attitude of the lenders.  They do have the power to change things, but instead, they are still throwing money away by the truck loads ... and ruining a lot of innocent lives in the process.  None of it it makes any sense! 

Surely they can afford to beef up staffing in their short sale departments to handle the load better (if you doubt that, just take a good look at your truth-in-lending figures or a simple amortization schedule and add up the interest they make just in the first couple of years alone). If they invested some of that money to place and train the staff they desperately need, they might be able to turn this market back around. I've watched buyer after buyer get discouraged waiting to hear back on their offers during the short sale period and walk away (and I'm talking about GOOD offers from legitimate buyers with GREAT credit).  Just as they did in this case, the lenders end up missing the best offers, then incur untold additional costs by forcing the property into the expensive legal process of foreclosure ... which leads to further distress on the now-vacant properties via exposure to neglect, theft or vandalism ... which results in drastically reduced net pricing ... which in turn creates havoc in the resale values over the entire market (even on non-foreclosure resales).  It's a vicious cycle and nobody wins.  It's got to stop.

In my not-so-humble opinion, I believe that someone (other than you, Stella) should have cared enough to do their job and priortized your short sale offer.  Instead, on top of dealing with the horrific illness of their child, this innocent family has also had any chance of their financial recovery completely wrecked for a very long time to come.  It's beyond shameful. 

Oh my ... I just realized how long and involved my comment on this had become.  Sorry for the short novel here, but apparently, your post inspired a passion I've been holding back for far too long.  I understand how defeated you feel because I've been through this with clients too, but you did everything you possibly could do to try to save them, and you shouldn't be anything but proud of yourself for that.  It makes you a great human being AND a great Realtor.  All my best to you, and your client.

Stella: It is a sad situaltion. Now I do Loss Mitigation for a company that represents several mortage companies and in a required short sale class they tell us that the bank looks at these in terms of is it going to cost less to foreclose or do the short sale. In many cases a short sale will save the bank thousands of dollars. Now when a package is turned in, keep in mind the negotiators are handling several hundred files at any given time. If there is something missing, it either go to the bottom of the stack or in many cases to the shreader.

 I'm sure there are some files that getcought up in the loop and the foreclosure date arrives before a short sale can be completed. It can take 45 to 90 days for some short sales to go threw the process and this don't mean they are approved.

 Don't mean to sound negative.. just wanted to share what was in our class to maybe shed some light

Stella, very sad why the banks make decisions such as this. They just don't have common sense at times. Maybe that is why they are called BANKruptcy.

Sometimes it is just a "no decision".  Someone waits to long to make a decision and the process just continues on.

I posted something with statistics from my area last week and the lenders are their own worst enemy.  Sellers just don't understand the process and in this example their child is their primary concern. Another statistic with no common sense. It's like the lender gets out of bed and says dee-da-dee (Carlos Mencia comment).

 

This is unconscionable but I'm afraid it's "business as usual" for a lot of lenders for the reasons you've all mentioned.  I have taken some liberties when I feel that I'm getting stone-walled by a negotiator.  I write to the lender's attorney and have even written to the judge presiding over the foreclosure case.  The attorneys are in no position to stop the foreclosure without the lender's authorization but I have been successful in buying additional time for the lenders to make up their dang minds! 

In what way with the above scenario is it OK to then submit FORECLOSURE to the sellers(who provided a better offer) credit report?

Except, the banks seem to be a bit behind on that score, as well.

Lack of "common sense"? Unfortunately this is an oxymoron in the Banking industry. Very rarely will a house sold at auction fetch as much as the short sale, not to mention the foreclosure fees, which average approx. $54,000.

Very unfortunate for you and your clients. Lets hope the next one goes better!

Stella -  just read your post....  pitiful.......  and what does that new act the President signed do for people in legitimate trouble?

Berchta - if lender really didn't want to own properties, they would stop employing under qualified, non decision making, no authority given staff in their back rooms and give someone the ability to approve offers that benefit the bank as well as the clients.