Hat tip to MB for sending this in, from the nytimes.com:
PHOENIX — Bank of America and GMAC are firing up their formidable foreclosure machines again today, after a brief pause.
But hard-pressed homeowners like Lydia Sweetland are asking why lenders often balk at a less disruptive solution: short sales, which allow owners to sell deeply devalued homes for less than what remains on their mortgage.
Ms. Sweetland, 47, tried such a sale this summer out of desperation. She had lost her high-paying job and drained her once-flush retirement savings, and her bank, GMAC, wouldn’t modify her mortgage. After seven months of being unable to pay her mortgage, she decided that a short sale would give her more time to move out of her Phoenix home and damage her credit rating less than a foreclosure.
She owes $206,000 and found a buyer who would pay $200,000. Last Friday, GMAC rejected that offer and said it would foreclose in seven days, even though, according to Ms. Sweetland’s broker, the bank estimates it will make $19,000 less on a foreclosure than on a short sale.
“I guess I could salute and say, ‘O.K., I’m walking, here’s the keys,’ ” says Ms. Sweetland, as she sits in a plastic Adirondack chair on her patio. “But I need a little time, and I don’t want to just leave the house vacant. I loved this neighborhood.”
Homeowners, advocates and realty agents offer particularly pointed criticism of Bank of America, the nation’s largest servicer of mortgages, and a recipient of billions of dollars in federal bailout aid. Its holdings account for 31 percent of the pending foreclosures in Maricopa County, which includes Phoenix and Scottsdale, according to an analysis for The Arizona Republic.
The bank instructs real estate agents to use its computer program to evaluate short sales. But in three cases observed by The New York Times in collaboration with two real estate agents, the bank’s system repeatedly asked for and lost the same information and generated inaccurate responses. In half a dozen more cases examined by The New York Times, Bank of America rejected short sale offers, foreclosed and auctioned off houses at lower prices.
“When I hear that a client’s mortgage is held by Bank of America, I just sigh. Our chances of getting an approval for them just went from 90 percent to 50-50,” said Benjamin Toma, who has a family-run real estate agency in Phoenix.
Fannie Mae, the mortgage finance company with federal backing, gives cash incentives to encourage servicers, who are affiliated with banks and who oversee great bundles of delinquent mortgages, to approve short sales.
But less obvious financial incentives can push toward a foreclosure rather than a short sale. Servicers can reap high fees from foreclosures. And lenders can try to collect on private mortgage insurance.
Some advocates and real estate agents also point to an April 2009 regulatory change in an obscure federal accounting law. The change, in effect, allowed banks to foreclose on a home without having to write down a loss until that home was sold. By contrast, if a bank agrees to a short sale, it must mark the loss immediately.
Ms. Sweetland’s real estate agent, Sherry Rampy, appeared to receive good news last week. GMAC re-examined her client’s application and suggested it might be approved. But the bank attached a condition: Ms. Sweetland must come up with $2,000 in closing costs or pay $100 a month for 50 months to the bank. Ms. Sweetland, however, is flat broke.
“After this, I’ll never buy again,” Ms. Sweetland says. “This is not the American dream. This is not my American dream.”
“After this, I’ll never buy again,” Ms. Sweetland says. “This is not the American dream. This is not my American dream.”
You are a Deadbeat. Your American dream is to live in a house for free. Now stop crying learn a trade and go get a job. I don’t know why the news keeps painting those not paying their mortgages as victims.
She paid her mortgage until there was nothing left. It was to the banks advantage to do a short sale.
Bank of America is the most beaucratic red tape hell hole on the planet, more so than any government agency.
shadash..I’m sure that it was you on the soap box a couple years back crying out how the deadbeat investment clubs (banks) shouldn’t receive any g’funds and the banks should have their business foreclosed on because of fraudulent business practices.
Existing Home Sales Jumped 10% in September, Largest Jump in 28 Years.
Diana Olick called it noise, and is looking for another plunge next month:
http://www.cnbc.com/id/39831789
Peace,
I’ve been saying that banks shouldn’t be bailed out before the inception of TARP and for that matter before mainstream news even began to grasp the concept of a “housing bubble” (aka credit/debt bubble)
People learn from financial mistakes that put them in jail, or penniless on the curb. The idea that a slap on the wrist which allows scammers to keep all their ill gotten gains will stop them from scamming again is laughable. And this goes double for businesses.
I promise you if banks are allowed to fail other banks will spring up to take their place. The lure of free money from fractional reserve banking it too great.
Are any of you still banking with Bank of America??
Why?
“Bank of America Finds Foreclosure Mistakes: Report” (I don’t subscribe to WSJ so can’t link the entire article.)
Article: http://finance.yahoo.com/news/Bank-of-America-finds-rb-179212490.html?x=0&sec=topStories&pos=1&asset=&ccode=#mwpphu-container
“She owes $206,000 and found a buyer who would pay $200,000.”
Am I missing something there? If the buyer produces six grand more, they can buy the home in a regular retail sale and avoid all this short/foreclosure messiness?
The sellers need to ask themselves why they should be doing short sales. They’re only doing someone else a favor. The credit hit is sometimes just as bad, or at best slightly better.
We still bank with BofA–at least they are still around–glad we weren’t banking with WaMu or one of the other banks that folded or got gobbled-Bye-Bye. IMHO, banks are kind of like cell phone companies, you hear complaints about EVERY company in the industry regardless–Noone ever seems to be happy with their bank, or with their cell phone carrier! Me, I am happy with both!
There’s something that doesn’t quite pass the smell test with this example. She has $206K she owes on house – buyer won’t pay more than $200K.
Nah, there’s something else going on here.
Kelja,
Here’s something else to think about…
She owes 206k which if refied at 5% would be around $1105 per month.
45k per year after taxes = $627 (roughly) per week
or
$627×3=$1881 per month
$1881-$1105= $776 per month in living expenses
45k = $21 per hour (roughly)
care to explain how a short sale allows the homeowner to “keep ill gotten gains”?
It is more than $6,000 off. You are forgetting commissions unless this is a FSBO, transfer taxes, title and escrow fees, etc.
And shadash apparently believes that with nearly 10% unemployment and another 9% of 10% under employed that 1 in 5 or 6 American’s are dead beats.
care to explain how a short sale allows the homeowner to “keep ill gotten gains”?
*Did she have a Heloc/2nd that is not getting paid back?
*Did she receive cash back at close?
*Did she refi and take money out?
If selling at a loss in a short sale. These are the type of “keep ill gotten gains” she scammed other people to receive.
SFrealtor,
In-and-Out starts employees out at $10 per hour and you can work 40 hours per week. they also offers flexible schedules,paid vacations, free meals, comprehensive training, and a 401k plan.
McDonalds Managers earn over 150k and after 20 years of good service generally are rewarded with their own franchise. Franchise owners often make over a million a year.
Bitch all you want but there are opportunities out there if you’re willing to work.
“McDonalds Managers earn over 150k”
————–
…every four years….
Short sales aren’t short.
“McDonalds Managers earn over 150k”
I believe the proper job title is McManager.
5 out of 17 comments from one name, rather mean-spirited in tone. Something is wrong with this picture.
I’m really tired of hearing about people blowing through their retirement accounts. Its quite possibly the most insane thing to do when facing foreclosure. DO NOT TOUCH YOUR RETIREMENT MONEY FFS.
nephlem, no doubt. What the heck goes through their heads? This scares me 10x more than that unwise initial mortgage. Retirement money is protected. Buying too much house on emotion when every “expert” in the transaction is telling you what a great idea it is is one thing. This is just financial suicide.
Getting tossed on the kerb at 40 is a vacation compared to getting tossed on the kerb at 80. You think Soc Security is going to keep you comfortable forty years from now? I really want to reach through the LCD and shake an ounce of sense into these people.
interesting questions. Don’t you think you should get answers to them before jumping to conclusions about the homeowner in the article??