If I hadn't heard the words from Countrywide's short sale negotiator myself, I may not have believed it. Countrywide started out in this business as a bottom feeder, and I offer this story as evidence that Countrywide is returning to its roots. The demand Countrywide made yesterday on a short sale was vicious with an evil undertone.
A common factor among many short sales today is some lenders want the sellers to make a cash contribution at closing. That's not unexpected in some transactions. We had negotiated that contribution for the sellers down to $2,500, even though the sellers did not have the cash in the bank. They had planned to borrow the money from their parents.
This couple's situation is a classic short sale case. The wife suffered a miscarriage and was diagnosed with a severe medical condition that forced her to quit her part-time job. They struggled to make ends meet. She became pregnant again, carried the baby to term just as her husband's business blew up and medical bills escalated. Their home was upside down. They called Countrywide to see if they could do a loan modification, but since they were current on their payments, Countrywide rejected them and suggested they try a short sale.
We listed the home 6 weeks ago and the sellers left Sacramento. The husband found a new job in the Silicon Valley, they rented a house there and were in the process of trying to piece their lives back together when the demand for $2,500 arrived. But their parents would step up to the plate to help them.
The clincher is that within an hour of approving the short sale under those conditions, Countrywide's negotiator called back. Seems she ran the sellers' credit reports and discovered the sellers have great credit scores. They pay their credit cards in full every month, the negotiator said. Under those conditions, Countrywide changed its mind. Why, the sellers have the ability to tap those cash-advance credit lines. That's the ticket, said Countrywide. The sellers should go further into debt to the tune of 24% interest and take out cash advances on their credit cards.
Now Countrywide wants a minimum of $5,000, "probably more," the negotiator said, and even though the sellers don't have the money, they have the ability to borrow it from another bank. Apparently, the sellers haven't suffered enough.
This, after the short sale was approved!?! It's akin to kicking a guy when he's down and raping his wife.
Why should the sellers agree to this when they can walk away and owe nothing? The negotiator continued, "They haven't made a mortgage payment since November."
"You know what? They aren't going to pay February, March, April, May, June, July or August, either," I replied. "So you can foreclose and take a bigger hit, or you can stick to your original proposal." The negotiator turned a bit testy, saying something about personal liability after a foreclosure, but I cut her off. "There is no personal liability on purchase money loans under a trustee's sale," I said. "The worst case scenario for this couple is they won't be able to buy another home for 2 years versus 5 for a foreclosure," adding that maybe she would like to read my book on short sales that's coming out next month.
The bottom line is Countrywide would not approve a loan modification because the sellers were current on their payments. Now Countrywide won't approve a short sale because the sellers are behind on their payments, unless the sellers agree to plunge further into debt. Do you see reasoning in this logic?
Maybe a better question is should Countrywide receive your tax dollars and benefit from the $750-billion bailout? Parent company, Bank of America, is watching its stock plunge and requesting billions more from the government. Should we give it to them?
The Short Sale Savior, by Elizabeth Weintraub, coming to a bookstore near you in February.
Photo: Big Stock Photo
Comments(178)