The housing market has been the number one problem for clients of mine this year. I am compelled to spend a lot of time with short sale experts, mortgage lenders, and real estate agents to find out the best opportunities for my clients. Recently I sat down with Todd Bittner and he revealed the following information. Remember, we are not attorneys, but we strive to provide as much education in this area as possible. If you have legal questions, please seek the counsel of an attorney. (For a recommendation, please give us a call or email.) ~ Victor
After more than four years’ experience working with lenders and homeowners, completing loan modifications and short sales, I have developed a keen insight into what makes these undertakings succeed or fail.
The number one reason for failure is, of course, the banks themselves. That is no great mystery. We have all heard (or witnessed firsthand) the challenges, frustrations, and disheartening stories of both homeowners and potential buyers trying to navigate through the “process” with their friendly and helpful lender, only to fall short at some point.
However, the number two “villain”, wreaking havoc in the world of real estate and home ownership is – the homeowner! Yes, the homeowners themselves derail their own efforts to stay in their homes and avoid foreclosure. I can pick out several clients who are making it more difficult, if not impossible, for me to help facilitate their short sale or loan modification. In numerous cases, it was easier working with the lender than with the homeowner.
The homeowner’s efforts are often sabotaged by their mental approach to the situation. They are afraid. They have never experienced this situation before, and most likely have heard horror stories about others who have tried and failed. They often approach this scenario as a no-win situation from the very beginning, and fold at the very first obstacle, even though I tell them our company’s general short sale success rate is 95%. However, some clients cannot rest until they are able to find a way to succeed in their failure!
The next “category” of self defeatism is the client who can never seem to focus their time to submit proper documentation to the right people in a timely fashion. Did you know that over 50% of loan modifications are denied due to homeowners’ documents being submitted improperly or incompletely? Now, the lenders do everything in their power to trip us up on paperwork, it’s true. I have seen time and again where the processor just keeps asking for more paperwork, or one item at a time, or with very tight deadlines, or they keep “losing” something that has been sent 5 times previously. There is no doubt in my mind that the main job of these front line “processors” is to weed out as many files as possible because there is such a huge back log. No one will admit it, but there are too many instances where this was an obvious tactic employed by the lender – and it works. Usually, it is a recent bank statement or paystub that takes the client forever to obtain – something simple that ought to be available within a day or two. Many of my clients just send me bank statements, and tell me their pay check amount appears on their statement. This is the kind of thing the lender looks for in order to decline the file, and move on to the next 100 sitting on their desk.
Another peculiarity is the client who really does not understand what is being done, but they have friends or family with a connection in real estate or accounting who claims to be an expert. This is a double-edged sword for the homeowner. Though it is great to have a trusted individual to confide in and get advice from, it can really be a problem if this ‘expert’ is giving well intended, but incorrect, inaccurate, or outdated advice. Clients can get bad advice from realtors, mortgage brokers, their own lender, CPA’s, and even attorneys. The rule of thumb is to ask if this friend actually participates in short sales or loan modifications, how many they have been involved with, and how recently. It is difficult for a realtor friend who did one short sale a year ago to have the same level of knowledge and experience as someone like me, with four years’ experience, who works daily on dozens of short sales and loan modifications.
The take away from all of this is to be more aware of what you are up against. The lenders are not your friends. They are part of a big business looking to make as much profit as possible, and if their plan happens to help out the homeowner, then that is a nice bonus. (Yes, they will usually be nice on the phone even when they are telling you there is nothing they can do and your house is going to be auctioned off tomorrow.) Even though our company has done well, we cannot succeed
without reasonable participation from the homeowner – it is a team effort. Of course, there is nothing wrong with getting a second opinion or doing some more research, but questioning every item every step of the way can (and will) bog down everyone’s efforts, jeopardizing the overall success of the loan modification or short sale.
The purpose of this piece was not to be negative, but to make troubled homeowners aware that loan modifications and short sales can be very challenging (if not downright daunting!). Frequently, these same homeowners can be their own worst enemy. Short sales CAN be done. Loan modification success rates have crept up over the last year or so. There is hope – our company is successful with 95% of our short sales – and that is a good number for any undertaking.
(Edited by Linda Reyburn)
