Deb Espinoza's Real Estate BLOG: March 2010

March 25- CA. Govenor just signed a $200M bill to credit first time homebuyers 5% or $10,000 on purchases of new or used homes. Cotracts must be signed May 1 through Dec. 31 2010 and escrow must close by August 2011. The credit will be split over 3 years and the buyer must live in the home for 2 years or return the money to the state.

Great idea to keep homebuyers in the market since the Federal credit of $8000 is expiring... however, I am wondering where a bankrupt state comes up with the $200M

Just in case you have a short sale file with GMAC that was being handled by the Philadelphia office and you hadn't heard... That office was closed, probably over the weekend because that is when I lost track of my loss mitigator. All files have been transfered to the Dallas office and you have to wait for them to be assigned to a new negotiator there.  My sale was supposed to close yesterday; emails to get HUD approved came back undeliverable; mailbox full, and phone calls to mitigator's direct line were forwarded to the main customer service number. No one there can handle the file to close it until we are assigned a new person...  Great.

Just in case you haven't heard.. Chase is selling pretty much ALL their second mortgages to a credit collection agency. Well, actually that is what they WANT you to think. What I have reason to believe is that Chase created a new (strong) arm of their company called Regency Collections and handed over all the second mortgages to professional canibals to kill any short sale deal that doesn't involve Chase also as the first mortgage holder. You see, I am told that if Chase also holds the first mortgage then "of course" Regency will accept the $3000 settlement on the HUD to release the lien; however, if Chase isn't the first then watch out! They are standing pretty firm on a MINIMUM of 20% and that's just to release the lien; if you want deficiency to go away then they want 60%!  Yeah, I think that every poor struggling homeowner has that laying around and if not, then they'll surely want to come clean and pay it back when they 'get back on their feet'. Oh, and also to complete the corrupt (in my opinion) package.... Regency DOES suggest that the homeowner make a 'special payment to bring down the principal balance" before escrow closes and this will entice them to release the lien with the additional amount that they get 'legally' off the HUD from short sale so they get at least their 20%. Hummm... Does this fall under the ILLEGAL practices that CAR warns agents about or did Chase/Regency get legal advice to make it so they don't have to follow everyone else's rules? Maybe it doesn't apply if the offer is made by a collection company and maybe this is 'special' verbiage that their slimy attorneys can wiggle around and get them off the hook if someone challenges it... Smells fishy to me for sure!!

This is plain and simple- Chase wants their short deals done; but screw the other banks and investors, homeowners that have Chase 2nds. They look to get away with this by hiding under the guise of Regency Collections, but guess what? My bet is this is ALL Chase-.   Regency says they didn't "buy" these loans; they are just acting as the credit collector for Chase and that all deals have to be approved by Chase (Chase confirms this) before they can release a lien on a short sale second. It's automatic that Chase will release a 2nd for $3K if Chase is the first mortgage holder; but no how, no way, if someone else holds the first. And in either situation Regency plans to go after the homeowner for deficiency. What a typical Chase tactic, this is a really great way to treat your customers; remember those whose tax money you have so easily taken to save your "Too big to fail company" from crappy business practices. You deserve the break and bail out but to hell with the little guy?? Don't forget that it's all the 'little guys' that made your company and could just as easily help its demise.

And on a lighter note, a St. Pat's Day blessing to you!

California Association of REALTORS; CAR has notified REALTORS of tactics that some lenders are using to extort 'additional' payments outside of escrow in order to release liens and approve short sales. I received this email today:

In one of my  deals the collection agency that purchased the 2nd has requested the seller "send a payment to reduce the principal balance" and this will induce the company to accept the payoff on the HUD allowed by the first mortgage holder and release the lien to allow the short sale transaction to be completed.

I first thought that extortion seemed like a really harsh word, however, I want to disclose that I looked up "extortion" and in my opinion I feel like this is the best description of what these lenders are doing.. What do you think??

So the (not so) funny thing is that the lender as the first mortgage holder is the 'victim' of loan fraud being a "Federally Insured Senior Lender",  and in the very next transaction they could very well be the perpetrator of the fraud against some other "senior lender". Now if only we could get the government to forbid the 2nd mortgage holders from selling to credit collection agencies...

I'm just reading an article by the New York Times about a government program to "Pay Homeowners to Sell at a Loss" if they 'haven't been rescued" by a loan modification. Are you kidding me? Does this reporter actually think that the benefit of this program is to pay the homeowner to do a short sale rather than being foreclosed on. What homeowner in their right mind wouldn't rather have a short sale on their record rather than a foreclosure and possible bankruptcy? DUH.

Listen here and listen well. It is not due to lack of homeowner willingness or cooperation that short sales are not being completed. Its the BIG STUPID banks and investors that bought those notes, and also the new creditors that have purchased these non-performing second and third liens. Most of these lenders have overworked, underpaid, and undertrained 'loss mitigators' handling these files; 100's of them per person. Their requirements are all different, their terms are all different, catch your negotiator on a bad day and you're screwed... your file disappears and you get to start all over! Some of these people get on their little power trips knowing that they have your homeowner's future in their hands; they demand more money without knowledge of values, they try to get payment 'under the table' off the closing statement because it probably gives them a bonus or something. Hello! This is illegal!, but we agents are in a quandry because we soo want to help our clients.

Why is it okay for these behemoth banks and investment companies to "strategically default' on their obligations but they'll be damned if they are going to let a homeowner who got caught in a housing frenzy that Freddie, Fannie, banks, investors, Acorn, Barney Frank and the great US Government et. al. who decided years back that "everyone in America should own a home", do it ?? Homeownership is NOT a right and not everyone has the income or discipline to be a homeowner. Yes, there are actually responsibilities that you should take on when you become a homeowner; not all are willing or able to do this. There really is a large section of the population that are meant to be renters; just as there are business owners and employees.

So, back to the article (you can tell this really flames me out eh?); A former executive at Fannie Mae; Thomas Lawler, stated that "short sales are taylor made for fraud", because in his words " If I lend someone $200K to buy a house and he tells me he has someone to buy it for $150,000 or else I am going to default. Do I really believe the borrower can't pay it back? and is $150,000 a reasonable offer for the property?" REALLY? Do you really not know how far housing prices have dropped since the bubble? and why are homeowners not allowed to use their brain and work a 'strategic default'? (Granted most homeowners are busted, broke, and disgusted- in an effort to try and keep their dream and do the right thing they have spent every stinking penney they had and some, even borrowed from family and their futures with 401K and IRA money) And why don't you tell me how Fannie Mae and Freddie Mac as companies run by the US Government are not neck deep in fraud in the practices that they have used not only help these homeowners get into this mess in the first place, but also in telling their stock holders that 'we are financially sound and there is nothing to worry about". HA HA HA

Its time the government gives the homeowners a break. The homeowner, NOT the bank or the investor. The only two good things I see in this program (set to start April 5, 2010) are the $1500 relocation fee that the homeowner gets at completion of the short sale and JACKPOT the fact that as part of the transaction They will get the lender's assurance that they will not be later sued for the unpaid mortgage balance. Hallelujah! You FINALLY made a brilliant decision!! Now lets do some more:

1. 1. As long as there is a buyer willing to pay fair market value for the property MAKE the lenders take the short sale offer! All of 'em..
2. As long as the homeowner hasn't taken mega bucks out on the property for toys and vacations, NO deficiency judgements allowed!
3. REFUSE to let these second mortgage holders (CHASE BANK), sell their second mortgages to collection agencies. It makes it close to impossible to complete a short sale because they won't release the lien for a standard $3K; and guess what? Chase, you made your bed now LIE IN IT!
4. Make all lenders that sell mortgages to Freddie and Fannie, FHA and Ginnie; Follow PROTOCAL on short sale process or FORGET ABOUT SELLING ANY MORE OF YOUR LOANS TO THEM! and maybe pay a penalty. Make the system smart; I know everyone has heard of KISS. Agent submits an offer and a comprehensive, professional valuation of the property. Homeowner supplies a hardship letter explaining their circumstances- Lost my job, moving need to sell, house isn't worth what I paid in the hey day and I don't want to spend the next 15 years of my life to get back to where I started because it MAKES GOOD SENSE and you would do it! These are all good reasons to short sale and don't try and tell me otherwise.
5. Make the lenders take the offer as settlement in full, no deficiency; 1099-C provided upon close of sale.  And yes, keep in that relocation amount of $1500; at least it means something to a person. Do you really think that giving a first or second mortgage an extra $1000 is going to sway them to allow the short sale? NOT... NO, it isn't and it doesn't. They already got enough of our damn money in your stupid bailout.

The sooner we do something like this, the sooner we flush out the mess and get back to normal. Stop making your programs all mamby-pamby and focused on these lenders. Focus on who you are 'pretending' to care to help, the ones who really need it; the homeowner, the families, the Americans who pay their taxes and pay your salaries!

The question that comes to my mind these days is When does a lender qualify as doing illegal dealings in this mortgage crisis debacle?  I see outrageous things that make you go hummm....  Take the foreclosed upon house for instance. I pull title and see that say RESMAE Mortgage Corp owned the  $200K loan that foreclosed, however, when the foreclosure recorded it showed as a SALE to Deutsche Bank for $1000 at a Trustee Sale. This property was actually an REO being serviced and sold by Ocwen. FYI- This title now creates a Red Flag on the new buyer who now gets to pay for TWO appraisals because the FHA requires this when a property sells for more than 100% of the last sale (which in this case was $1000).

So- I ask myself, "What is the reason for these strange title recordings?" Do you think it may be a banking 'magic trick' used to transfer properties back and forth strategically in order to make the most of the write offs and book cooking to take advantage of OUR funds so willingly given by the government to help these poor little banks from failing?? Is this strategic loss shown on the books of $199K plus helping these lenders ? and how nice for Deutsche Bank or Ocwen Loan Servicing who actually showed as the "seller" on the REO to get a house for $1000 that they then turn around and sell for $140K.  I'm just asking... and certainly wish I knew where to dig for answers to expose this.  Come to think of it, I recall a Ramona Realtors meeting sometime last year where a person on the legal affairs committee said that the Feds were investigating some property switching by BIG BANKS.. (BofA rings a bell in my memory) So say Big Bank 1 forecloses on a house with a loan for $450K and they turn around and sell to Big Bank 2 for 150K who immediately is able to get an offer and sell it for $380K... and apparently they were alternating sales back and forth. Now I never heard any more about it- but it sounds awful shady to me.

Now I see the new 'Perpetrator' as Chase bank.  All of us who work in short sales know that the SOP for 2nd liens has currently been $3000 max to the 2nd for lien release, and since that is what the Majority of the Big Banks were doing to their second lien holders we, in negotiating releases for the seconds that they owned, used this as a 'fair play' rule.. saying that since that is all you are willing to give a second then this should be what you will accept when you are the second. And yes, they capitulate and take the $3000. But wait! Chase apparently now has a much better idea, being all warm and fuzzy customer service like. Seeing as how they know the max they are going to get on a 2nd lien in a short sale is $3000 they have found a way to realize immediate gains. Yes! "Let's SELL a boat load of 2nds to a collection agency and get more than the measly $3K"  Brilliant. Thank you Chase.  I had a offer and HUD in to Chase that had approval from the first lien holder- we kept being told by Chase that we would have an assigned negotiator any day-- for two months we waited. Then lo and behold we call for our regular check up on status and are told the loan was sold to collections. Some place called Regency... and strange enough too that all their correspondence lists BOTH Regency and Chase Bank on it.  First Regency tells us they have to have approval from Chase then Chase says they have nothing to do with the loan because they sold it.  Could there be a possibility that a lender creates a 'strategic' alliance or actual other entity to 'sell' it's bad assets to?  I'm just asking...

Does anybody else wonder how these banks & investment firms deemed by the government as "Too big to fail" managed to go from the brink of failure to showing MEGA profits in just a year after getting our hard earned tax payer dollars?? And their people get the HUGE bonuses...??? Where is OUR bonus- shouldn't we have seen a large drop in the Country's deficit when they "paid back the money PLUS interest and fees" or were they not charged (properly, meaning like the rest of humankind would have been) for this help?  I guess this is what happens when it is politicians and not qualified business men and women who create these programs and ideas.... A huge disappointment when you think of the millions of qualified, intelligent people available to poll from for ideas on how to fix this mess...