Are Investors Losing Money Because of Their Short Sale Servicers?

Are Investors Losing Money Because of Their Short Sale Servicers? Massachusetts – New Hampshire

The simple answer is yes!!! YES!

Bank of America, Chase, GMAC, Ocwen, CITI, Wells Fargo are just some of the bigger secondary market lenders.  Now, what a lot of homeowners don’t realize is these companies many times just SERVICE a loan, meaning Fannie Mae or Freddie Mac may own the loan or be the investor of the loan and they have a servicing contract with let’s say Chase.

We’ve been doing short sales long enough to see some HUGELY disturbing patterns.  For the purpose of today’s blog, I’m going to use Chase to outline how they lost Fannie Mae approximately $80,000 on a loan, however I could write a book on Chase and how they’ve lost Fannie and Freddie, hundreds of thousands, and likely millions of dollars across the country.

This is a typical Chase serviced short sale that we deal with.  This one is a REAL case. It’s unfortunate that Fannie has lost over $80,000 on this deal and unfortunately, this is what I see across the board with servicers though.  I will also say that Chase has countered EVERY SINGLE one of our files, losing Freddie and Fannie HUGE money.

The property Chase is servicing is condo located in Massachusetts.  A very experienced short sale agent listed this property at FMV and got a very strong first offer.  The house is listed in April of 2012 and was listed at $175,000.  The condo comps were in the $160,000 to $180,000 range for a condo in superior condition.  Our condo is average condition with HOA dues in arrears for months, a second lien with Bayview who settles immediately for $6000 and a student loan on title that the homeowner’s mother is paying off.  The agent drops the price is increments of $5000 because no offers are being submitted.  She finally gets an offer for $140,000 and we submit it in July.  Chase countered the offer for $169,000.

The property at this point is still occupied and being maintained, however the homeowner is being incarcerated so our job just got 10X harder and now the property is going to be vacant.

The buyer ups their offer to $155,000, but knows repairs are needed and also knows he may have to pay unpaid condo dues so he doesn’t want to go too much higher, but does really love the condo.   He was going to pay close to $3100 in unpaid dues.  Seems like a slam dunk right?

The counter offer is submitted 9/7 and on 10/15 Chase declines the file with NO counter.  They state they want $169,000.  The buyer ups their offer to $163,000 because they really like the condo.  On 12/5 Chase counters at $168,900.  Obviously the buyer is soooo aggravated, and who can blame him, he walks.

Seller becomes incarcerated.  Chase knows this.  They don’t send property management company to rekey or winterize.  The property sits in the middle of winter in New England and the pipes burst.

Agent relists with disclosures about pipes, condo dues, etc.

1/17 – new offer submitted for $100,000, property has major damage, triple the condo dues, and is uninhabitable.  A new BPO is ordered.  Thankfully!!

2/15 – Chase counters $100,000 with a $199,000 counter.  Yes, if you are reading this blog, they want MORE money than the first BPO now with burst pipes and water damage everywhere.

I think it’s clear servicers can do MORE harm than good for investors.  I’m of the opinion that because of a servicers lack of competence that if the property forecloses for LESS than the original short sale offer that the seller AND THE INVESTOR should be suing the servicer.  I cannot understand why this is not in legislation yet.  Investors and servicers have a duty to try to get FMV for the offer, but not go beyond the system and make is so a sale crashes and burns.  This type of legislation would FORCE servicers to be MUCH more accountable when they order appraisals, and BPO’s or valuations.  There are COUNTELSS foreclosures on the market selling for much less than what was originally offered by a short sale buyer and it’s clear from the numerous short sales we’ve negotiated that had the servicer done their job correctly the first time, the investors would be NETTING much more money and the distressed homeowner would certainly not be facing foreclosure.

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