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Giant bank, giant struggle

March 8th, 2010 • By: julesroman • Blog

Foreclosure-assistance pipeline clogged for Bank of America NEW YORK – March 5, 2010 –Two years after swallowing the troubled mortgage giant Countrywide Financial, Bank of America trails other major U.S. lenders in resolving troubled home loans through short sales or modified loan terms. The lender, one of the nation’s biggest banks, holds more than a million mortgages that are months behind on their payments – twice as many defaulting home loans as any other lender in the country. But it has given permanent mortgage modifications to only about 1 percent of those borrowers – one of the lowest rates among lenders nationally, according to a report released last month on the federal government’s Home Affordable Modification Program.

The issue is key in Metropolitan Orlando, which has the nation’s 11th-highest rate of mortgage modifications, with 18,000 homeowners in trial modifications and 2,468 in permanent ones, the report stated. Loan modifications aren’t the only way of out a foreclosure. In January, about a quarter of all Orlando-area home closings were short sales, which occur when the lender allows a homeowner to sell the property for less than what’s owed on the mortgage. But when it comes to short sales, Bank of America also lags other lenders, real-estate agents say, by taking too long to respond to offers. “Realtors that I work with, if they hear Bank of America, they won’t even show the property,” said David Pruett, a broker for D.A. Pruett Properties. The chairman of the Orlando Regional Realtor Association, Kathleen Gallagher McIver, said recently that Bank of America has the worst record for expediting short sales, “and there’s not anyone out there who will tell you otherwise.” Bank of America acknowledges it needs help with its short sales. “We clearly recognize the need to improve the short-sale process for both our customers and the real-estate professionals who are critical to a successful transaction,” said Jumana Bauwen, a bank spokeswoman.

The company said it has updated its training, enhanced its technology and established a short-sale team to help customers and real-estate agents navigate the process. It is piloting a short-sale program for owners who don’t qualify for new mortgage terms. And it has established a 24-hour phone line so agents, buyers and sellers can track the status of their short sales. Bank of America is not alone in its struggles to deal with the avalanche of defaulting home mortgages, according to the February modification report by the U.S. Treasury Department and the U.S. Department of Housing and Urban Development. Wachovia Corp., now owned by Wells Fargo & Co., has approved permanently modified terms for fewer than 1 percent of its 86,461 defaulting mortgage customers.

American Home Mortgage Servicing Inc. has a similar track record with the 127,521 mortgages headed toward foreclosure that it holds. Among the nation’s largest lenders, GMAC Mortgage Inc. had the best rate: 17 percent of its 65,751 defaulting home loans have been permanently modified. Bank of America, which inherited much of its mortgage portfolio from Countrywide, says part of the problem is that many homeowners have not been diligent about submitting the documents needed to convert a trial mortgage modification into a permanent one. Clermont resident George Simmons said he is now totally frustrated, having tried for more than a year to get Bank of America to convert a series of trial modifications into something permanent. “Let’s see, the last correspondence I had from them said they didn’t have my income-tax return and my Social Security records,” Simmons said. “I sent it to them so many times. I’ve got my fax receipts and my certified postal receipts. They just keep asking for the same paperwork over and over and over again.” Overall, about a fifth of Bank of America’s defaulting-mortgage customers have received temporary, three-month trial modifications.

To address the huge volume of troubled loans needing permanent solutions, the company has hired about 15,000 staffers. Workers knock on doors and call homeowners with trial modifications at least 10 times before the temporary terms expire in three months. At one point, Bauwen said, Bank of America was behind in getting homeowners into trial loan modifications. But it has ramped up those efforts, she said, and many of those trials will be converted into permanent modifications. More importantly, Bauwen added, the company is not ramping up its foreclosure efforts unnecessarily.

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The Short Sale Process is Unbelievable!

February 16th, 2010 • By: julesroman • Blog

When describing the absurdity of the short sale process, I can only say that you would not believe how bad it really is unless you experience it first hand. Negotiating a short sale requires patience and tenacity. It really seems sometimes that banks have little to no interest in actually getting it done. Tarpon Coast Realty negotiates and buys homes on short sale. This YouTube video, Short Sale Hell really says it all. Take a minute to laugh when you see it – so true!

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When It’s OK to Walk Away From Your Home – WSJ Article

February 27th, 2010 • By: julesroman • Uncategorized

Millions of Americans are now deeply underwater on their mortgage. If you’re among them, you need to stop living in a dream world and give serious thought to walking away from the debt. No, you shouldn’t feel bad about it, and you shouldn’t feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family’s finances first.

How widespread is this? More than 11 million families are in “negative equity”—that is, they owe more on their home than it is worth—according to a report out this week by FirstAmerican Core Logic, a real-estate data firm. That’s a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwater—the equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That’s true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada.

Are you in this situation? Are you still battling to pay the bills each month, even when it may make little financial sense to do so? It’s time for some tough talk. Stop trying to chase your lost equity. That money is gone. Don’t think like the gambler who blows more and more cash trying to win back his losses. That’s how a lot of people turn a small loss into a big one. And do the math. Even if you hope the real estate market is near the bottom—it’s possible, but by no means certain—it may still take years to see any meaningful recovery. If you are 25% underwater, your home will have to rise by 33% just to get you back to even. Is that likely? And over what time period? Even if home prices rose by 5% a year from here, that would still take six years. And during that time you could instead be building fresh savings elsewhere.

If you are reluctant to give up on “your” home, realize that it isn’t “yours.” If you are in negative equity, it’s the bank’s home. You’re just renting it. And right now you may be paying way above market rates. You need to be ruthless about your cash flow. Are you worried about the legal consequences of walking away? Certainly, you should check with a lawyer before doing anything, but the consequences will probably be more limited than you think. In “non-recourse” states, the mortgage lender may have no right to come after you for any shortfall. They may have no option but to take the home, sell it and eat the loss. According to a survey last year by the Federal Reserve Bank of Richmond, such states include negative-equity hot spots California and Arizona. Even in “recourse” states, lenders may have limited ability to come after you. Often they’d have to jump a lot of legal hurdles, and it’s just not worth it for them. They’re swamped with cases anyway. “In my experience, right now they’re not really going after anyone,” says Richard Nemeth, a bankruptcy attorney in Cleveland. “They just don’t have the resources.”

If you’ve taken smart steps to protect your money, you may be safer still. For example, money held in a 401(k), Individual Retirement Account or pension plan is sheltered from creditors. Sure, a strategic foreclosure may hurt your credit score. But if you’re in financial difficulties, it’s probably already suffered. And your credit score is not the only thing in life that matters. Still, when it comes to the idea of walking away from debts, many people are held back by a sense of morality. They feel it’s wrong to abandon their obligations. They don’t want to be a deadbeat. Your instincts, while honorable, are leading you astray. The economy is fundamentally amoral.

Sometimes I think middle-class Americans are the only people who haven’t worked this out yet. They’re operating with a gallant but completely out-of-date plan of attack—like an old-fashioned cavalry with plumed hats and shining swords charging against machine guns. Do you think your lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it? They knew what they were doing when they wrote your loan. Many were guilty of malpractice, but they pocketed good money and they’ve gotten away with it. And if they thought your loan was “risk free,” how come they were charging you so much more than the interest on Treasury bonds? If you’re only a small amount underwater on your mortgage, it’s probably the case that you’re going to be better off staying put. But if you are deeply underwater, it’s a different matter.

Whether we like it or not, walking away from debts is as American as apple pie. Companies file for bankruptcy all the time, and their lenders eat the losses. Executives and investors pocketed millions from the likes of Washington Mutual, Lehman Brothers and Bear Stearns when the going was good. They didn’t have to give back one cent of that money when the companies went into bankruptcy. Limited liability, after all, is one of the main reasons every business from your local dry-cleaner to a major multinational gets incorporated in the first place. They’re not shy about protecting themselves if things go wrong. You shouldn’t be either.

Courtesy of Brett Arends Wall Street Journal brett.arends@wsj.com

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