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The Loan Modification Seesaw

Remember the seesaw on the playground? It was always a surprise to me when my playmate on the other side decided suddenly to jump off without warning. That’s what it’s like for many homeowners during the loan modification “review” process.

One day they’re out and told they do not qualify for a loan modification. The next day they’re in, and told their paperwork is “under review.” “Under review”, especially if it comes on the heels of “you don’t qualify”, usually means the loan servicer is stalling before they jump off the seesaw and foreclose.

I’ve heard this same story from several of my clients and other homeowners who lost their homes to foreclosure. It’s the recurring, nightmare loan modification story of their attempts to work out a loan modification with their loan servicer, Bank of America.

Bank of America reached a settlement of $8.5 billion (that’s billion, not million) to pay investors that lost money on mortgage-backed securities on Countrywide’s bundling (and re-bundling) of risky residential first liens. Bank of America inherited a mess from Countrywide when they bought out CW in August 2007.

According to WSJ, it may have been the worst acquisition in banking history, but will this settlement help homeowners now who are in default of their mortgage loan serviced by Bank of America?

The theme of NY Times article, “Bank’s Deal Means More Will Lose Their Homes,” says what I’ve concluded these last several months. Loan servicers, especially Bank of America, do not want to modify mortgage loans. Lenders are not in the business of loan modifications. Homeowners, who are in default, will be most likely on the fast track to foreclosure.

The article also points out that part of the settlement requires Bank of America to send out many of their loans to other, smaller loan servicing companies. If default is imminent for those homeowners, they may be one of the lucky borrowers, because they may now have a fighting chance at a loan modification through their new servicer. Time will tell later this year.

I’ll keep my hopes up that loan modifications will become a real solution to our housing recovery. However, the end of the NY Times article describes from a Bank of America customer what I’ve heard over and over from several different homeowners in Temecula Valley California about their loan modification attempts with Bank of America.

Just as I learned which of my playmates would choose to jump off the seesaw without warning, my advice is to plan for the landing.

Pamela Seley, REALTOR®
Short Sale Resource | CA DRE lic # 01824145
www.temeculavalleyhome.com | Dir 951.491.4063 | Email pamelaseley@gmail.com

Serving Southwest Riverside County California | Temecula, Murrieta, Menifee, Winchester, Lake Elsinore, Canyon Lake, Corona, Wildomar,  Hemet and San Jacinto Valley

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All information deemed reliable, but not guaranteed. Copyright © 2009-2011 by Pamela Seley, REALTOR®

If you are paying Cash for real estate, especially here in in a high cost area like Westchester, I have some advice as a broker who has worked with many cash buyers. First, congratulations on havng the recources to pay cash. You are blessed.

Here are a few steps that will help you in your efforts.

1. Get a statement for the account with the funds. It can be printed up from your online account, gotten from your bank branch or financial institution, or one of the statements they mail out periodically. 
2. Get a sharpie or magic marker. 
3. Take the sharpie or magic marker and black out your account number. Photocopy the document. 
4. Give the copied document to your agent so they submit it with your offer. 
5. If steps 1-4 won't suffice for some unfathomable reason, a letter from your personal banker, CPA or attorney stating that you have the funds in liquid for will do. This is frankly, more work, but it will do. 

Failure to provide this proof with your offer makes you look like a gnu, and will out you as an amateur, as a true professional has proof of funds at the ready. Starting a deal out with undermined credibility is not an auspicious beginning. 

Here is what will not substitute for steps 1-4:

• Impending lawsuit settlement, inheritance, or lottery winnings. 
• A pre approval for a line of credit on another property. 
• A letter in Microsoft Word from a hard money lender 200 miles away that you are "good for it."
• Vehement verbal assurances from your agent that you have the money, followed by how long the agent has been in the business.
• The promise of proof once we have a deal. No can do. Stoves never heat up without wood. Chop chop. 
• Acting insulted we had the temerity to ask for such proof. 
• Informing us that your broker is now in Tahiti, the fund manager needs their retina scan, and that we'll have something in writing on the first Friday of next month. Sorry Charlie.

Here's the thing: We aren't being nosy voyeurs who want to go through your financial medicine cabinet. We simply want to assure our seller client that you are a qualified buyer. Playing footsie with an uncredentialed cash buyer for weeks while we wait on contracts and inspections can cost us a real buyer, as we have obligations of disclosure that can scare other prospects away in the interim. This can cause a loss of time and significant money. In areas like Westchester and New York, real estate setbacks are crazy expensive. 

No seller can seriously evaluate an offer without proof that the buyer can perform. Money talks. Hot air walks. But it's more than that. It isn't personal. It is business. It is protocol. It is how we play in the sandbox. It is fundamental. It is not a favor or peering into your personal, confidential life. When you go to sell your property, you'll want a colonoscopy on your prospective buyer, and I won't blame you. But I'll assure you that steps 1-4 will be more than enough. 

 

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When Cash Isn't King

Investors and other buyers regularly tout the phrase that "Cash is King." Just this past week in an email, a prospective buyer commented that, "I guess cash buyers have a better chance at something along these lines." Not always. In fact, let me dis-spell the common myth that Cash is King with a couple of real life examples.

Mythbuster #1

Cash buyers will trump buyers who are financing a home.
 
A bank owned property comes on the market. After a week or so, a cash offer comes in. It is low, so we negotiate it. Result - buyer will not come up enough, bank will not go down enough. Buyer walks.

Another week goes by. Buyer #2 makes an offer with financing. While we are negotiating with Buyer #2, Buyer #1 comes back and ups their offer $5,000, still lower than Buyer #1's offer. Multiple Offer Disclosures are given to both buyers.

Buyer #1 sticks with their offer - remember, Cash is King, right? Buyer #2 raises their offer to near list price. The bank selects Buyer #2, whose financed offer is $6,000 net higher than the cash offer. Busted: Cash is Not King in this transaction.

Mythbuster #2

Cash Buyers can come in with ridiculously low offers and get the house because they are paying with cash and can close quickly.

In a world where Sellers have equal access to internet information along with buyers, ignorance of value is not as common as it once was. Banks have access to Broker Price Opinions and Appraisals, and their investors set limits as to how much they are willing to lose on a property.

Cash buyers coming in with a low ball offer like a gunman swaggering into town are often kicked to the curb when a more sensible buyer, studying the true market value, then offering a fair price wins out over the cocky low ball cash offer.

Mythbuster #3

Banks will take cash because they know it will close.

Surprise - it's all cash at the closing table. Banks often don't really value a cash offer over a financed offer, in our experience. They go for the highest offer from a creditworthy buyer. Trends change and in this economic climate, cash may not be king.

Banks are trying to recover as much as they can from the huge losses they have written off. The result is that Cash is Not necessarily King anymore. If you have any questions about how to negotiate with a bank and bust the myths, please call or text us.

 

-------------------------------------------------------------------------------

Call or text us at 904-673-2308 or e-mail - sharon@teamalters.com

Visit our website for more information about Jacksonville, Fleming Island, Orange Park, St. Johns real estate, homes for sale, school information, & area news/events.

Serving 

           Jacksonville * Fleming Island * Orange Park * St. Johns * St. Augustine * Ponte Vedra

If Original Photography, All Rights Reserved. 

 

Join us!

 

When Cash Isn't King

Investors and other buyers regularly tout the phrase that "Cash is King." Just this past week in an email, a prospective buyer commented that, "I guess cash buyers have a better chance at something along these lines." Not always. In fact, let me dis-spell the common myth that Cash is King with a couple of real life examples.

Mythbuster #1

Cash buyers will trump buyers who are financing a home.
 
A bank owned property comes on the market. After a week or so, a cash offer comes in. It is low, so we negotiate it. Result - buyer will not come up enough, bank will not go down enough. Buyer walks.

Another week goes by. Buyer #2 makes an offer with financing. While we are negotiating with Buyer #2, Buyer #1 comes back and ups their offer $5,000, still lower than Buyer #1's offer. Multiple Offer Disclosures are given to both buyers.

Buyer #1 sticks with their offer - remember, Cash is King, right? Buyer #2 raises their offer to near list price. The bank selects Buyer #2, whose financed offer is $6,000 net higher than the cash offer. Busted: Cash is Not King in this transaction.

Mythbuster #2

Cash Buyers can come in with ridiculously low offers and get the house because they are paying with cash and can close quickly.

In a world where Sellers have equal access to internet information along with buyers, ignorance of value is not as common as it once was. Banks have access to Broker Price Opinions and Appraisals, and their investors set limits as to how much they are willing to lose on a property.

Cash buyers coming in with a low ball offer like a gunman swaggering into town are often kicked to the curb when a more sensible buyer, studying the true market value, then offering a fair price wins out over the cocky low ball cash offer.

Mythbuster #3

Banks will take cash because they know it will close.

Surprise - it's all cash at the closing table. Banks often don't really value a cash offer over a financed offer, in our experience. They go for the highest offer from a creditworthy buyer. Trends change and in this economic climate, cash may not be king.

Banks are trying to recover as much as they can from the huge losses they have written off. The result is that Cash is Not necessarily King anymore. If you have any questions about how to negotiate with a bank and bust the myths, please call or text us.

 

-------------------------------------------------------------------------------

Call or text us at 904-673-2308 or e-mail - sharon@teamalters.com

Visit our website for more information about Jacksonville, Fleming Island, Orange Park, St. Johns real estate, homes for sale, school information, & area news/events.

Serving 

           Jacksonville * Fleming Island * Orange Park * St. Johns * St. Augustine * Ponte Vedra

If Original Photography, All Rights Reserved. 

 

Join us!