Short Sale My Queen Creek Home: Short Sales and proving financial hardship....does it really matter??

I agree that at some points banks need to start express path short sales. i.e. the seller has signed away all equity and interest and and a third party has offered to buy so sign off and go. It is getting tot eh point that with all documents in hand the bank now  say it will take 4 - 6 weeks for approval .. come on what buy in is willing to wait 6 weeks .. heck the same bank will not lock in a rate that long.

It the lenders want to really bring an end to the housing market full out .. approval short sales in less then 30 days.

 

Jessica,

Thanks for the post. Not only should lenders be jumping at the opportunity to consummate a short sale because  it is far less expensive than a foreclosure, but they should be working more expeditiously to close sooner rather than later.

I think the banks can't get a handle on it all or they just can't do the short sales the way we want them to.

Why should the banks let someone walk way simply because they want to.  If the owner can AFFORD to pay their mortgage on the home, they should not get a free pass to just walk away and buy one down the road at half price.

Some banks are not as strict on Hardship letters and their financial workout sheet, but a lot are paying close attention to it.

I have to lean towards Tim opinion... it isn't in the banks interest to do a short sale if the owner has the means to make the loan whole.  Not WANTING to pay the mortgage and not being ABLE to pay the mortgage are two totally different things.  I don't know if MI allows for lenders to pursue diffency claim as they can here in Virginia, but would like to hear from MI agents on that one.

That being said, I grew up in Wayne, MI outside Detroit and my mom just told me that Ford was going to shut down the truck plant on Michigan Ave for 3 months due to low demand.  That does not bode well for the state's economy going forward.

the banks confuse me..I don't know why they don't work these things out in a short sale....like you said the end is foreclosure, so why not cut to the chase...and sell it short....it drives me crazy..the stupidity..

The banks will cut off their nose to spite their face. They grudgingly approve short sales as it is and they really feel that they would rather foreclose and lose tens of thousands than give someone a free ticket out that doesn'y deserve it. They may be right in many respects but what about the ones that do deserve it that get denied. not to mention the ridiculous rate that their stocks are falling du to their excessive losses. There is no solid balance with most of the lenders and that is why you have some that are doing every short to get out and move on and others that would rather go bankrupt thangive someone a break.

Ineveitably they know that the feds are there with deep pockets to bail them out. Indymacs failure is the banks free ticket out of their problem. I had a legitimate short sale on the burnr for 6 months when that happened and now its in limbo. There will be more banks going down that road and our tax dollars will bail them out.

There is another school of thought to consider. Do you think that maybe the banks want these forclosed homes so that they can weasel their way into real estate? They're already halfway here now.

Hmmm....banks getting into real estate.....what a scary concept!

There is a big problem with lenders not being able to process these short sales quickly enough, but let me throw out what the reality is. In many cases the contracts being submitted to the lenders are just ridiculous. Many agents are sending in contracts that are pennies on the dollar. It is still a business and what business would take less just because someone wants them too. Yes, there are problems with the short sales taking so long to get approved but I think it is an industry problem.

Lenders weren't ready for this and their personnel are new to their positions. Most of these loans are owned by investors and therefore the lenders do not have the last say. Agents are sending whatever ridiculous contracts they get. There has been a new industry born that profits from foreclosures and bankruptcies. 

Short Sale Pathways, lenders don't want to own these homes. The more property they own the less they can lend. If banks aren't lending then they're not making money. The problem at IndyMac was that they didn't have enough cash reserves because it was all tied up in properties they owned. The FDIC didn't bail them out, the took them over. It is a vast difference.

Banks have been trying to get into real estate for a hundred years. Every time they make an attempt. NAR ia there to lobby against it. This is only a theory but what if they use this crisis in order to lobby congress to allow the banks to sell real estate cutting out the middleman. (realtors) more profit for the banks and more control on how they offset their losses. Not to metion direct investing rather than selling the paper on wall street. Just a thought.

I think that indymac was bailed out beause they are not going to be held liable for their irresponsible lending standards. Indymacs failure was directly attributed to subprime lending and just the fact that they are not being forced to rectify the problem that they created is a bailout in its own right. It shows that the bank can fall and uncle sam will be there to catch you. I know it needs to happen at some point but I'm afraid that the FDIC is setting a low standard that many more banks are going to use as their fallback so that they don't have to deal with repairing their problems. That could be volatile and expensive for the american people.

The money to lend has dried up because of securities, its not due to the number of houses that the banks own (although it has have an effect on the investors attitude towards the market). Right now their paper is nearly worthless and therefore investors are not investing into the hedge funds, REIT's etc... Wall street just has no faith in securities and when the housing packages are not selling there is no additional money to lend.

Valid point Jessica. It's just a standard condition to have when submitting an offer to the bank unfortunatley.

SHORT SALE PATHWAYS--I have a hard time seeing the conspiracy of the Lender trying to get into real estate. This would be a great opportunity since they are owners of a vast amount of properties, yet they turn to Realtors for help in the sale of those properties. I can't see the conspiracy. NAR can't stop anyone from selling their properties, if that were the case there would be no FSBO's

And again, IndyMac was not balied out it was taken over. There are strict rules on how much cash lenders need to have on hand. When they own properties that cash requirement rises and they can't loan out any money. If banks can't make loans then they can't make money. IndyMac was a take over, Bear Stearns was a bailout.

Once the short sale process starts the seller is mentally out....the bad credit begins (or had already begun).  The banks/investors are left with bad or worse - short sale or foreclosure.  In California a homeowner knows they can sit in their home for 6 to 10 months or more with no mortgage payments being made.  Seems like the banks would be more motivated to end the bleeding.  Some of the banks we have dealt with have moved extremely fast to approval, others lanquish in their own beauracracies and systems requesting all sorts of additional financial data from the seller to confirm hardship....while the seller spends another month mortgage free in their home.  I understand the banks desire to confirm hardship, I also understand the seller's decision.  There are no perfect answers........

Hardship smardship.. It shouldn't really matter. Yes I understand if you  buy a home, take a mortgage and you are able to pay you should! However, this is America... They don't have debtor's jail.

The banks need to hire more help, get the bpos/short sale process down to 45 days. I am working a short sale with CITI MORTGAGE, did you know it can take up to 72 days AFTER the BPO is done to get an answer?? WOW!!  The banks cut their profits by their turn times.

But in reality these banks are not really losing money, it is just a short term loss. Lets look at a 250k mortgage, in 30 years the finance charge is 350k, which equals 600k. So if the banks take a 100k hit lets say or even a 200k hit, they are still making money.

Now obviously some might say that folks don't keep a mortgage for 30years.. but that just means more fees and interest for the lenders in the long run.. so they still make out.

They need to turn and burn their REOs.. these lenders made their money off of wall street and the investors are the true people that lost. Countrywide's CEO received 115M exiting bonus not to mention all together 400M just running the company.

Indymac/Wachovia.. they made bad loans.. their option arm(Neg am. Loans) are just now beginning to hit the fan which will spike the foreclosure rate because of homes being completely upside down by up to 50% of what the property once was worth.

I agree that most banks are taking a bit more time than they should to get these short sales approved but I think that is a simplified explanation and there are more people involved that make the process even longer. We all know that many times there are investors in ownership of these mortgages and the lender doesn't have final say. We need to get an approval from the lender to send the package to the investor. The investor OK's the package but now it needs to be sent to FHA for their approval. Consider the hoops that need to jumped if there are two loans and a PMI involved. The other matter is the abundance of agents that just aren't doing the necessary work. By that I mean to bring attention to the agents that just submit any contract that comes along or they submit multiple contracts and further confuse the process.

Lender's are losing a bunch of money. The FDIC doesn't take over banks just for the sake of moving in. IndyMac is just the first of many. WAMU, anyone?

The smart banks are cutting their losses. I thought that WAMU would be the first big dog to fail but....

Jessica,

Believe it or not, I've had experience with short sales where the homeowner wasn't in financial distress and the bank still accepted short sale offers. With buyers who got into a home with no skin in the game, some lenders are wising up to the fact that they should cut their losses. Doesn't seem to have caught on yet, but just give it time.

The bank absoluetly will do a short sale for a seller with no financial hardship.  They will even do it for someone who has significant assets, but there probably will be strings attached (promissory note) as there should be.

http://short_sale_expert.activerain.com/

Joe,

I agree with you. Banks will do short sales with no hardship involved. I just completed 2 short sales for an investor with 2 investment properties. 

The one bank accepted about 50%(157k/350k) of what was owed and the second accepted about 56% (362k/640k). Hard to believe but it happened.

Keep in mind this is still probably more than they would have netted in about a year if they would have completed the foreclosure.

Alan & Joe,

This is great news! Which banks are you aware have allowed the non hardship short sales?

I understand how the numbers work as far as showing how much the lender is willing accept in a short sale. I'm going to use the numbers mentioned above ( and this in no way is an explanation as to what happened there because I don't know all the details, but...) 

Many times we see when someone says the lender accepted 50% of what was owed, and most of the time there is a collective--Wow. I say that is a bit of a dangerous statements because it could lead to someone who is not involved in short sales to misunderstand the meaning of that math. It seems simple, yet most of us know that the amount owed is pretty much irrelevant and the main number of concern is the market value. If market value in the numbers used above (157K/350K) is 155K then in reality the approval was based on market value, which is a fair representation of the going rate. Lenders are more focused on the market value more so than on the amount owed. Let's not forget that when it goes to REO, the lenders usually price it below market value and not as a percentage of what is owed.

On the other hand, the 50% number would lead many to believe that you should offer a ridiculous number and se if you can walk away with a steal. The representation of the 50% is not indicative of the market value of the home. I strongly believe that this misunderstanding of the numbers is causing too many low offers on these homes because there is a belief that the lenders will accept anything--which is not the case on the vast numbers of short sales in negotiations.

I have walked away from "investor" clients that want to offer 30% tp 40% off market value because the have a friend that bought something in that range. Going back to see what actually happened and it turns out that is was 30% to 40% off the price of the last sale 4 years ago. Apples and Oranges, my friends.

another reason banks require hardship letters and all the borrowers financial info is that the bank can sort out which borrowers they can pursue a deficiency and which ones would be a further waste of resources. 

Just trying to weed out the jilted investor that can continue to make their payments but are upset their investment has lost value. That's it.

I have a situation where my home was being broken into as my wife and I were driving up to our home. It was the scariest thing I've ever encountered. Our bedroom was a disaster and we couldn't sleep in our own bedroom for weeks. My wife and I still feel weird at night and she occasionally loses sleep over it. We bought a small townhouse we could afford and unfortunately alot of the homes in our area are empty making our neighborhood prone to MANY, MANY crimes.

Just the other day, my wife and I were getting home to find a man jumping over our fence. He had busted the lock and I guess was planning on breaking in. Our fear was relived and again want to try and move. We are thinking of starting a family soon and want a safe place to raise children. We want to move but can't.

Would the banks consider my situation a hardship?

I would really appreciate everyone's help.