Short pay on Existing mortgage and keep the house
I have a client that has come to me and says that BOA is offering to accept about 80% of the current value, (about 50% of the existing mortgage balance debt) as acceptance to pay off the exsting mortgage. The buyer has the ability to have this fundraiser, but just wondering if anyone else has any experience? It sounds smart on the banks side to offer this program, but smart and bank in the same sentence???
Jackie Henderson Kumm
Edina Realty
Replies to This Discussion
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Permalink Reply by Richard on
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Jackie,
I don't know if your client have true family hardship, or just trying to get out from under payments. However if it is the latter of the two, Harry words are 200% right on!!!!!! I couldn't agree more. I've worked my butt off for years to be responsible and pay off my mortgages. What about me?????? Level the playing field. What about all things I had to give up to be responsible and I've never used my homes as an ATM machine. It's about good decision making and being responsible. And, some people will always have to learn the hard way.
Remember, life is tough, but it's even tougher if we're stupid.
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Permalink Reply by Jeff Payne on
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too many assumptions. Would love to know the hardship. Would you still think this way if something catastrophic happened like seller lost a wage earning spouse or went thru and beat cancer? I think it is a great idea providing borrower has a true hardship. Even if they don't it might be a good business decision for both bank and borower. Not enough info for me to make a judgement
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Permalink Reply by Eric Mieles on
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Just for conversation sake can I pose another opinion. How fair is it for the investor who owns to paper to have to accept 50% of what he's owed and there no recourse to any one else? If I lent you money to buy a car and you needed it really really bad so you could get to and from work and one day you say "I lost my job and I only have $3000 of the $15k you lent me. Take it as full payoff so I can be relieved and I'll just keep the car so I can drive around and find another job" would you accept?
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Good question, if I loaned the money I would want to know a few things... What are the prospects for my borrower for getting a new job? What is the probability that they will be able to pay me back after getting a new job. If I have to repossess the car, what is the condition and what is it worth? Is the car in bad condition, has it been maintained? After I weigh my options I am going to make a decision based on what is best for my bottom line, it might be to take the $3000 and move on or it might be to take the car back. Too many variables to make these types of decisions without knowing all the facts.
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Permalink Reply by SE Davis on
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Jackie;
Advise your client to "get everything in writing" from BOA first then JUMP ALL OVER that written offer and close it as soon as possible.
The reason why they are offering this doesn't matter but allow me to suggest the following.
BOA is loaded with toxic mortgages mostly caused by Countrywide the failed mortgage company they had to buy in late 2008.
It could very likely be that BOA cannot legally foreclose on that property for a variety of reasons, missing paperwork, failed REMIC, litigation rejection of their default insurance policies on that mortgage, too much inventory in the same zip code or they may have simply determined that that homeowner is financially capable of .closing this offer and this will help their bigger picture servicing problems.
Get everything in writing, have your homeowner apply with BOA for refinancing of their own mortgage first. This enables your homeowner to leverage any title issues post closing.
If BOA won't finance it then send them to any other lender.
Good Luck.
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Permalink Reply by Steve Norris on
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If the bank is offering the deal and they can do it, then, yes...get everything in writing before sending in a nickle and then keep the paperwork forever.
Who gives a rat's anatomy about what people "think" is "fair". If it's legit, take the deal.
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Harry would you actually recommend to a seller to NOT do this because it is not fair? Since when is the short sale world fair? What brokers and agents did with NINJA loans has nothing to do with a lender making an acceptable offer to a homeowner whether it is a loan mod or short sale.
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I agree Steve, obviously there is a benefit to the lender if they are offering this and it obviously would benefit the homeowner. I also really dont care what anyone thinks is fair because nothing in life is fair.
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Hi Steve,
I have to agree with Harry on this one. First, no personal offense on your viewpoint as this website encourage viewpoints from others.
Next, these "peace offerings gone wild" does nothing for the struggling honest and foresight mortgagers or the future of the economy. Even though it is the lender's money, we all end up sharing the losses. Let's not forget about Wall Street. I would to say that I think most people are very sympathy towards people who sustain real life hardship crisis but, this type of offering seems to predominantly reward people who don't make good decisions.
More often than not, these decisions that were made start start with by the homeowner were equivalent to a "man trying to cross a NASCAR track during a race with a cell phone to his ear."
Then, by the numbers involved we all end up sharing these costs in bank goods, services and fees as we've all seen lately in the news. Regarding the question of "Who gives a rats a_ss what people think?" I do! And, I would certainly hope that the professionals who have a bigger influence on the future of this industry would do the same.
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Permalink Reply by Cliff Stanwick on
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The mortgage industry was radically changed by investment banks offering streamline mortgages, insured to mitigate the "risk," and then further restructured in the form of mortgage back securities. Now instead of one bad mortgage, a bad mortgage will impact the pool of mortgages. Through the brilliance of Glass Steagall ordinary Banks were given new latitude to venture into the investment world and sell the same poorly designed mortgage programs. Basically a license for the Banks to make money any which way, a case of deregulation gone bad and here we are. Definitely was the fault of the Homeowner these mortgages. Banking is no more than the "retailing" of money.
In the end the Banks were the ones who created this mess offering unsustainable mortgages to the Buyer (Really, 125% HELOCs were a good idea too). Banks saw the fees and minimized the risk. One of the more ludicrous changes in our business was after 2008, we had to qualify the Buyer/borrower. So many escrows fell out due to unqualified buyers for a while. Before that well "anybody" could get a loan and any type of loan (negative amortization being the most egregious) and payment worked for the Bank. Did you ever have an appraisal issue back in the day?
To simplify the plight of any homeowner or to even judge who is worthy of a "bailout" is a sad commnetary on the current state of real estate.
Everyone has lost who bought a home in the last 10 years, and even if you didn't the value you "thought" you had is diminished. I think it is amazing how if short sales might go away through a workout with the owner all of a sudden a discussion of morality or fairness shows up
In my opinion, if you want to be righteous don't do short sales, if every agent stopped doing shorts, the Banks would have to address the constructive fraud of their lending and appraisal practices that led to everyone losing. There might be real change but I estimate change will be dependent upon how much of your income is derived from short sales or whether or not there is a commission in the workout.
Don't worry about bank cost, repercussion of bad mortgages, bailout, what not. Warren Buffett says all our problems can be solved by printing money. We don't have inflation, it seem deflation is a bigger issue. Monetary policy is regulated by debt (Bush I wanted to pay off the debt, The Treasury Dept said it was a bad idea (Google for the white paper)). Too big to fail is still alive. And if that doesn't work we have Dodd-Frank which by 2014 is suppose to protect us from the Banks. Don't worry, be happy.
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Cashback refi's another great money making product for the banks. Better yet they were never fixed rate for the most part. Borrow against your house but you can use the money for anything you want. IRS gives you a write off on the interest. Win-Win.
We went from a society that was how much can you afford to how much you can pay.
Funny how the foreclosure problems in states were cash back refis weren't allowed are less than states like California.
Money has no morality, it is legal tender.
Short sales are not a fresh start, Bankruptcy is (Right there on the official US Gov Bankruptcy Court Website). The Banks spent millions changing bankruptcy laws in 2004 so you couldn't write off credit card debt. Banks also lobbied to change in bankruptcy laws for your personal residence.. In both Chapter 11 and Chapter 13 bankruptcies, the debtor’s plan can “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence.” Other than to cure defaults, a bankruptcy court is powerless to make changes to the terms of a mortgage on a debtor’s principal residence, subject to a few exceptions, including the right to strip off wholly unsecured junior mortgage liens and the right to modify loans secured by other collateral.
Everyone has to live with the consequences of their actions, if they are financially responsible so be it, but when the banks constantly force a diffferent responsibility I find both parties are culpable. Sort of like the Apple and the Serpent in the Garden of Eden, and I often wonder why God didn't kill the Serpent. Then again there is something in that book about Money changers too.
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Harry, I agree, a short sale can definately be a fresh or fresher start without the stench of a foreclosure or BK. Each situation is so very different, we should never make such general statements or think that one size fits all.
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