Are Banks Sabotaging a Market Recovery?

By
Services for Real Estate Pros with Marketing with Kate

  This past week I've had numerous conversations with Real Estate Agents and other professionals that have left my mind spinning.

All of these conversations have dealt with banks not holding up their end of the process.  Frustrations abound from both consumers and professionals when dealing with banks and loan service companies  It occurred to me that the banks are the wrench in the spokes of any kind of recovery.

Here are some examples:

1.  An REO property that's been on the market for months.  There are currently three offers on the property, none of which have been responded to, at least one of which will expire in three days time.

2.  Short Sale - two offers on the table, no response from the bank, communication has stopped.  Real Estate Agents, Homeowner and Buyer are all disgusted.

3. Homeowner, not yet in default,  wanting to modify their loan who can't through through the first line of defense with the bank.  Many homes are lost to short sale or foreclosure because of this.

4.  Banks cutting Real Estate Agents commissions at the 11th hour and not dealing in good faith.

5.  Some Real Estate Agents refusing to show properties listed as a Short Sale because of the complications, time involvement and potential loss of income.  I'm hearing that many would rather wait for the house to hit foreclosure status.

6.  The news media reporting that banks don't trust other banks, thus hurting overall liquidity.

To get through this market, the machinery must be well tuned and all the gears much be turning together It is inexcusable for banks to have offers on the table and not respond to them.  Reality is that for a recovery of any type to take place, inventory must be diminished and time on market must be shortened.  Consumer confidence must return which will then drive employment and other positive economic factors.

Here are my recommendations:

1.  Hire experienced employees at the front line to deal with homeowners.  Empower these employees to think and make decisions.  At a minimum empower them to get the process started.

2.  Deal in good faith, pay the Agent working on the front line for their hard work. 

3.  Respond to offers in a timely manner.  In the real world we are given 48 - 72 hours to respond to an offer.  Banks need to establish these policies or something similar.  Taking 30 or more days to respond  an offer is inexcusable.

4.  Be proactive - if a loan is scheduled to recast, automatically extend the terms for another 3 - 5 years.  Don't wait for the consumer to contact you.  The consumer is embarrassed and afraid of dealing with the bank, make it easy.

5.  Establish policies that will put fewer homes into short sale or foreclosure status.  When someone sends in a Short Sale package, ask the question:    What will it take to keep you in your home?  Can we modify the loan instead?  What do we need to modify it to?  How can we help you keep your home?

6.  Forget short term profitability and take a long term view.  The faster we move through the inventory the quicker the banks balance sheets and market liquidity will recover.

By implementing these kinds of strategies, fewer homes would go into short sale or foreclosure, the market will stabilize more quickly.  Both inventory and time on market will decrease, home prices will stabilize and the consumer confidence will significantly improve.

Keeping people in their homes and moving inventory should be a top priority.  Tent cities are not a long term option or solution!

 

Posted by

I am Kate Bourland. I help people like you get out of debt. Debt Settlement, Mortgage Acceleration, and practical suggestions for eliminating debt. Call for a Free Debt Evaluation.



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Comments (53)

Alan Brown
Coldwell Banker Montrose Colorado - Montrose, CO
29 Years of Real Estate Experience .

I think the banks are overwhelmed with people in foreclosure and short sales, that they do not have any where near enough staff to take care of all the files in a timely manner.

Jul 20, 2008 08:44 AM
Pam Jank
Coldwell Banker Schneidmiller Realty - Coeur d'Alene, ID
Your Coeur d'Alene & North Idaho Real Estate Pro

Kate,

 Your post ideas are "Common Since" unfortunately, the Banks are unable to perform at a Commons Sense level.  There are too many chains of command.  Unlike working with 1-Seller and 1-Buyer on a contract.  No one has the infinite power to make any decisions in a timely manor.

It seems to reason, if they could streamline the process the would save alot of money.....

I just worked with a local lender that has managed to streamline their process. As a result, we were able to get the entire presentation and acceptance process completed in only 3-business days.   We closed in 3-weeks! Wow! what a difference!!   Granted.. the loan had been an inhouse loan but even those used to that a minimum of 2-weels to get an answer.

Pam

Jul 20, 2008 10:28 AM
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

Wow, lots of comments - I have some thoughts on some of the comments that I'll address later this evening.  Thanks for looking and keep the comments coming.  Maybe there is a way to get our voices heard!

Jul 20, 2008 11:29 AM
Kathy Anderson
Arizona Luxury & Lifestyle Living - Cave Creek, AZ
Arizona Homes For Sale, Sun City Grand

We've all heard that banks don't want to be in the business of owning real estate yet we are all hearing similar stories that result in the banks owning more and more inventory

Jul 20, 2008 12:45 PM
Rick Turner
Key Realty - Toledo, OH
Puts People In Their Places!!

Folks, let's get real... the same dumb a#@es that approved the orginal loans are now the ones that have to explain to their bosses that they screwed up!  It's no wonder we get stuck in this gigantic maize we are in now. We bring qualified applicants to buy based on current market conditions and we get squeezed on our commissions!  Just think how nice it's going to be when this whole mess works it way out... Maybe in 2010!

Jul 20, 2008 02:06 PM
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

Kathy, yes it is a conumdrum isn't it.  Seems that the banks need to decide where they want to be, my instincts tell me it's more complicated than that.

Rick, I don't think it's that simple.  The people that approved the loans are probably no longer working for the bank AND all they did was follow the products and guidelines that were approved by upper management.  The products and guidelines were approved based on market demand and profitability, not sound business decisions.

Jul 20, 2008 02:55 PM
Karen Monsour
Coldwell Banker Fort Lauderdale Beach - Fort Lauderdale, FL
REALTOR, SSRS - Sells FL Waterfront, Short Sale Expert!

I have a short sale that another great agent and I have been working since late last October...4 new contract's to appease the bank and 9 month's later...the buyer said, forget it...I'll find something that I can actually buy. Like was said above, the bank changed their mind's on price about 4 times...sans the 4 new contracts...we reduced our commission. Then they wanted us to reduce it a second time...This is a rediculous situation.  We bring buyer's to help them out...and they stallllll.

I like the comment above...they should be called "long sales"!

Jul 20, 2008 03:01 PM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

It might not actually be in the best interest of the bank to complete a sale, depending on the insurance that they are carrying on a given loan...  It might actually be better for them to ride it out and "take the loss" because it is smaller than the loss from getting it over with. 

Not a defense... just a thought.

Jul 20, 2008 04:35 PM
Olan Carder
Fairway Independent Mortgage - Charlotte, NC

I think they are overwhelmed, but that is no excuse.  If they paid the people that handled this on commission they would care a little more...

Olan Carder
www.charlottemortgageonline.com

 

Jul 20, 2008 05:10 PM
Anonymous
Steve Stoddard

If banks, at the very least, would issue  policy statements detailing what their short sales rules were, what we can expect or not, how to best navigate those rules, and how long we could expect to wait for decisions, we could all work together better to get through this mess. Instead us Realtors are left swimming in the dark with no idea what to expect and what to tell our clients. 

Funny how when they want business from us they kiss our back sides to get our referals but when we need cooperation from them we're treated like 2nd class citizens.

When a buyer client asks to see a short sale I always explain the potential difficulties they may face. More often than not the decide to skip them.

Jul 20, 2008 10:35 PM
#43
Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC

It's beyone maddening-----I have an offer in to a bank that we'll pull today.  We've waited and waited with no resonse and the buyer is ready to move on to a more attractive property. 

Jul 20, 2008 11:22 PM
Anonymous
Norma Pellicane

Great post and so true.  it's impossible to deal with the banks in this market.  I'm now staying away from the short sales for awhile.  You wait so long that the buyers walk away and the bank doesn't respond.

Jul 21, 2008 02:46 AM
#45
Matt Heaton
Timu Corp - CEO, ActiveRain - Co-founder - Bothell, WA

Part of the banks hesitance is accounting.  They have not taken write downs on much of the REO they are holding and at the time of liquidation for would forced to take the appropriate write downs.  There are many regional banks that would prove to be under capitalized once this occurred. 

Over the weekend I downloaded the publically available database of bank data from the FDIC's website into a huge excel spreadsheet and did a bunch of analysis on how these writedowns would effect tier capital ratios.  I'm going to try to put together a blog post on it in the next few days.  Lets just say the results are not pretty, a very large number of banks are in much worse financial shape than their reported tier capital ratios show.

Jul 21, 2008 07:15 AM
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

Matt, I think that you may have hit the nail on the head.  It comes down to liquidity and banks not trusting banks because they know the secrets that are being hidden in their undisclosed balance sheets.

This combined with Lenn Harleys post, is very foreboding for the overall economy as a whole!

Jul 21, 2008 07:18 AM
Anonymous
Anonymous

Kate... Great post, and great comments.  There's not really much I can add except that my partners and I try our best to steer clear of foreclosures and short sales for all the reasons already mentioned.  we're having all the same problems in Georgia also.  But we are constantly having buyers contact us who want to look only for foreclosed and short sale properties.  It really puts Realtors between the perverbial "rock" (dealing with the banks and lowered commissions) and "hard place" (trying to build business with genuine concern and action for our clients)!

Jul 21, 2008 08:34 AM
#48
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

BTW, Matt Heaton (above) is a SERIOUS bank geek... and probably knows more than some of the people regulating the business...  Pay attention to what he figures out...

Jul 22, 2008 01:06 AM
Ronald Gillis
Southwest Florida Notaries (Mortgage Notary Signing Agent) - Port Charlotte, FL
CNSA Southwest Florida. Notaries, Port Charlotte, 941-7-NOTARY

I would have to say that the banks are feeling like they need to do everything possible to get more money out of the situation, which is probably correct, but they go about it without much sense or reasoning!  Kind of like cut off your nose to spite your face, they are wearing blinders and missing what is going on around them, then making bad decisions because of that.

Signature

Jul 25, 2008 01:49 PM
Todd Clark
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

Now can we forward this to every bank president out there! This is exactly what almost everyone of us in the public is thinking.

They just don't get it,

Todd Clark, Helping Families Home - www.IFoundYourNewHome.com

Sep 06, 2008 05:18 PM
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

Thanks Todd - I agree!!!

Sep 10, 2008 10:14 PM
Linda Peters
Salem Five Mortgage Company - York, ME

Hi Kate, it's been awhile since I've checked in here and yours was one of the first blogs I went to check out.

EXCELLENT POST!!!

As usual, you present thoughtful and insightful content.    I hear the same frustrations from the real estate agents in my market and it seems that logic is replaced by complacency and a lack of common sense.   Perhaps AR should start lobbying Washington and the bureaucracy's that refuse to work for a common sense (and common good) - immediate solution to pushing though the REO's and short sales in a timely manner.   It seems banks want it both ways..... they won't push through these transactions but will sit and wait for the government to bail them out.     Shameful!

 

Sep 27, 2008 01:56 AM

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