Has your short sale or loan modification been turned down and you have no idea why? Let's examine some of the reasons. These reasons may not make you feel any better or maybe they are just excuses by your lender, however there are a few things you may not even know about your loan. 
Let's say that you make your mortgage payment to Wells Fargo. You can no longer handle your payments so you ask Wells Fargo to modify your loan- to do a loan modification for you. You are behind in your payments. You are in fact, in foreclosure but you are still living in your home and the judge in your case has not ordered the sale of your home at auction yet. You are scared. You see your neighbors losing their homes all around you. You are hopeful because you see on the news and in the newspapers that the Federal Making Homes Affordable Program has been helping some folks keep their home and get a loan modification.
You are no longer making your mortgage payment because your adjustable rate has been applied and your mortgage payment has gone from $1600 a month to $2300 per month. You just can not make these payments. You have been trying for almost 2 years now to get Wells Fargo to approve your loan modification. You even hired an attorney to help you with your foreclosure defense.
Wells Fargo turns down your loan modification request. You wonder, how could this be? After all, Wells Fargo is one of the large lenders and is participating in the government's Federal Making Homes Affordable program.
But Wells Fargo tells you that the investor is the one that will not allow you to get a loan modification. What in the world is an investor doing making decisions on your loan you wonder. Well, you are not alone in your confusion. Every day we are explaining the whole mortgage note owner thing to buyers agents, real estate agents and homeowners.
Just because you make your house payments to Wells Fargo does not mean they own that note that you are paying on. They are the servicer. Other words you will hear them called are asset management companies.
The very first thing you need to do before you ask for a loan modification is to find out who actually owns your note. You can do this by calling who you make your mortgage payments to and asking them.
If it is Freddie Mac or Fannie Mae that own your note- you have a much better chance at getting your loan modification approved if you qualify. If it is a private group of investors, your chances go way down. Why would this happen?
One in eight homeowners' loans were sold to investors on Wall Street. What happens is that a bunch of loans are packaged together. These are called mortgage-backed securities. They are then sold off to investors. Homeowners who have mortgage-backed securitized loan are five times more likely to be late on their house payments. Many of these borrowers were given loans they were not qualified for from the beginning. Many of the homeowners getting these loans did not read the fine print and did not realize how high their mortgage payments might go when adjusted.
The rules to allow modifications, short sales and terms of foreclosures and deficiencies are ambiguous at best. Homeowners who are told no by the investor have little recourse.
The federal Making Homes Affordable program lenders who participate in the program must modify all homeowners that qualify. The exception is when the investor has a rule that they do not allow modifications.
The Federal Housing Finance Agency reported to Congress on June 3rd that these securitized mortgages are a "hurdle" to the success of the Making Homes Affordable program. The treasury department has not disclosed why the modifications are denied so there are little to no facts to go on.
Why would the investors say no to your loan modification? Well, Wells Fargo's response is that the investors need their money. Wells Fargo has one situation where the borrowers ( the homeowners) are trying to get their loan modified but Goldman Sachs is the issuer and Deutsche Bank is the trustee. But when you go and talk to these investors and we have on several occasions when doing short sale negotiations for our sellers; the investor passes the buck back to the servicer. For instance, Deutsche Bank says that Wells Fargo is solely responsible for the decision to modify a loan or not.
Some people say that the investors are the scapegoats. Everything can easily be blamed on them. Since you rarely get to speak to anyone at the investors' group it is hard to tell who is telling the truth. In this particular situation Wells Fargo is saying that the investor is not forgiving the past due debt and that makes the payment go up on a loan modification because then Wells Fargo would have to put that past due balance along with all the penalties and fees into the loan modification which then may cause the homeowner to not qualify financially for the loan modification.
Servicers have agreements, contracts that they sign with investors. These agreements contain the rules for modifications. These agreements are called Pooling and Servicing Agreements which is known as PSA's. The PSA is most often what the servicer says is the reason for them not being able to do the loan modification or release the deficiency on a short sale.
But when you talk to other people in the management areas or to the investors they claim that there is nothing in the PSA's that would prevent the servicer from approving loan modifications, short sales and releases. There is a new study coming out from a law school wherein they state that only 8% of these mortgage-backed securities agreements contain any language that says the servicer is not allowed to do a loan modification for these notes. That means that about 92% of all the NO's; could actually be YES's. So why would that even happen?
Fear of law suits! The language in the PSA in question here, Wells Fargo and Deutsche Bank- it says that Wells Fargo can "waive, modify or vary any term" as long as Wells Fargo as the servicer makes a "reasonable and prudent determination" that the modification is in the investor's best interest. Attorneys examining these agreements say there is quite a bit of room for servicers to make these decisions. But the language itself in this agreement is enough for the servicers legal counsel to be concerned with the investor suing them for not acting in the best interest of the investor. They can not, no matter how inhumane this sounds, put the homeowner ahead of the investor. This is about business and if they want business from investors they need to make sure they are looking out for the interests of the investors.
The treasury department has stated that the fear of law suits is the biggest deterrent to getting the servicers to approve loan modifications and short sales. So doing little or simply turning down the loan modifications are the answer many servicers choose. This is not personal and this is not against you, the homeowner. The position of the servicers is to watch their own backs and to protect the assets to which they have been entrusted with, your mortgage-backed security. The Treasury Department says they can relieve some of the pressure of the fear of lawsuits by standardizing requirements for loan modifications and also provide some type of calculation to figure out if the investor will make more money by the loan modification or by the foreclosure.
We need to keep in mind one big thing in all of this and that is that these investors end up being regular people because most of these mortgage-backed securities were bought by pension funds and retirement plans of folks like your parents or even yourselves. You may well be one of the shareholders of the very loan you can not pay.
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Is Your Short Sale Or Loan Modification Being Turned Down?-was first published on South- Florida-Luxury-Living.com.
Copyright © 2009 By Katerina Gasset, All Rights Reserved.*Is Your Short Sale Or Loan Modification Being Turned Down?*
I am not surprised to hear of fingers pointing in both directions between the lender and the investors. We will probably not have a clear picture of the whole senario of short sale negotiations until 5-10 years down the line. It will be very interesting to see what really happened behind the scenes during this period.
Great Summary on short sale "disapprovals".
Cathy- Thank you. I know a lot of blame goes on investors by servicers and I also know that servicers are afraid of being sued by the investors. There was supposed to be some legislation passed to help relieve the servicers of some of this fear of law suits but it was struck out at the last minute. It is most likely a lot larger of an issue than just lenders and servicers. Katerina
Katerina:
Great presentation of some basic (though complex) info that needs to be well understood by any homeowner who is having troubles. I have re-blogged and flagged for feature.
Katerina - thanks for telling it like it is!
Hi Katerina, that was a very informative post on what goes on behind the loan mod/short sale doors. I agree 100% with your statement: "The Treasury Department says they can relieve some of the pressure of the fear of lawsuits by standardizing requirements for loan modifications and also provide some type of calculation to figure out if the investor will make more money by the loan modification or by the foreclosure." Very true. :)
Outstanding!!
Mortgage servicing companies have had the authority to modify loans all along. I discovered that fact about a year ago when researching servicing agreement. There was an announcement by Fannie Mae but I can't get my hands on it today. In fact, most servicing agreements with the securitization pools specifically give that authority. The fear of lawsuits on the part of the pools is, I believe, one of the reasons the servicers fail to act on individual mortgage modification applications.
This is probably the best article describing the failure of loan modifications I've read, anywhere.
Thanks for the heads up. I love your clear explanations all the time !
Wow, this is great to read such a clear explanation on why loan mod's most often don't work.
Bookmarked to send to some of my sellers. Should be required reading for anyone attempting short sales and loan mod's.
Katerine: I'm amazed at the number of people not realizing that a loan modification if properly utilized can be the difference whether they keep thier home or not. Your article is well written and a must read for anyone doing short sales.
Superbly presented! Thank you for a clear, concise post. We are re-blogging so that all of our readers can benefit from your writing.
KATERINA- THIS IS A BRILLIANT EXPLAINATION! Excellent and well deserving of a gold star!
One of the best explanations I have seen to date about the process Katerina!
Wonderful explanation of one of the confusing areas of the negotiation and denial problems. Definite Reblog. Appreciate the concise format and details. Should be required reading for agents and sellers alike. Thanks Katrina
Thanks for the information. We hear story after story, but this makes a lot of sense.
This is great information and I plan to share it with my agents that do short sales. Thanks for posting.
Clear, concise and an expert description of PSAs, Katerina!
I'd venture to guess that at least half of my short sales in Sacramento come about as a failed attempt to do a loan modification. I'm working on one right now where the investors on a Guild Mortgage loan are saying they will not approve the short sale unless the seller moves back into the home -- that their rules say the home cannot be vacant. The seller has lost her job and cannot afford to move back into this home. This may very well turn out to be my first short sale denial this year.
Great post! You might also add, if the home owner is a member of an association, condo with lots of back dues owed and/or additional liens on the property and it's effects on the short sale.
Thanks, I hope you don't mind if I re-blog this one.
Katerina -- This is by far the best explanation I have read on the process, especially the info on the PSAs. The Treasury Dept. needs to work on standardizing loan mod requirements.
Regarding the short sales, HousingWire.com reports the the Treasury Dept. will finally release details by the end of this month on streamlining and standardizing the short sale process. http://www.housingwire.com/2009/09/10/federal-incentives-coming-for-short-sales-deeds-in-lieu/
I have been dealing with three different mortgage servicing companies over the past several months I get the distinct impression they would prefer to maintain the current loan status and continue collecting the servicing fees...drag everything out as long as they can and hope you give up. This attempt to win by attrition is killing the market...if you can't move forward or back you are stuck where you are.
Thank you, thank you, THANK YOU. I'm going to forward this to a few people this morning. Hands down the best explanation of what the heck is going on...
A wealth of info. Thank you.
Linda Metallo, Re/max Impact, Lockport, Il.
Thanks for the clear explanation of the servicer/ investor relationship. I think that many times this is a very easy excuse to not have a timely response. It is always easier for the servicer to point a finger, then to take responsibility
What we need is the lenders to get these short sales streamlined. In my market if the huge backlog of pending short sales would close it would help the real estate market, and the greater economy as well.
Katerina...
This is an excellent explanation of some nuances in the system that could derail preemptive action. A great read, very,very well done!
The more information we have on hand the better equipped we are to handle the ongoing daily trek through the short sale world of Real Estate, especially South Florida real estate! Thank you for posting this information and making us more informed of "the other side" of the short sale coin.
Thanks Katerina
You have given me food for thought.I have to make sure my sellers are aware of this. I think the best part is knowing that I could be one of those investors. WOW. I never thought of that.
Katerina, this is an amazingly clear, well-written post. Agents around the country should be getting this type of information in our continuing ed classes.
Thanks for the detailed information. I will pass it on to others
Wow! That was a great deal of wonderful information....thanks for sharing it...it will be useful to some of my clients too!
WOW! I posted this at 3 a.m. when I finally finished writing it and then crashed after one comment. I wake up to find not only this was featured but has been reblogged 8 times! THANKS! Spread the word and keep on reblogging so your sellers and buyers and consumers can read this explanation. Thanks for these wonderful compliments also!
Brilliant post with clarity and insight. Thank you!!
Katerina, This is AWSOME information. Thank you.
Interesting...good information thanks.
Thank YOU! I am sending to my Associates right now....
Amy
Wow, this by far is the best clarification of the back door workings of loan mods. Thanks, interesting and clears many questions that I've had!
Katerina,
Your last paragraph sums it up very well.
Thanks for the post, the best description I have read on this subject.
Speaking of short sales, we had been negotiating a short sale with Countrywide for the last 4 months. Both the first and second were with them. We just got an email saying that the investor on the second will not do a short sale. No reason, no explanation. We are scratching our heads as to why this investor would rather have the home go into foreclosure versus maybe money from the first, or a interest free loan for a portion of the balance. It's gettiong a little crazy out there.
Great post!! You have clearly explained something that can be difficult to explain to homeowners.
Joe- Because the second can do a charge off, sell the bad debt to the fastest growing industry- bad debt collectors ( a lot of attorneys are getting into that game) and then hound the people until they pay them something. Something is better than nothing. They buy this debt for 20 cents to 30 cents on the dollar and it is profitable. A second can charge off if it is aline of credit anytime during the process and do not have to foreclose. It is cheaper and more profitable to sell charge offs than to foreclose and with line of credits it is the breach of the promissory note that is being sued on. Katerina
This is an amazingly clear post... you guys really know your stuff! And the information you share here is very frustrating for the homeowner going into foreclosure. It really makes me think that I should have gone to law school - if for no other reason, then to be on the side of these poor homeowners...
Nestor & Katerina,
Any suggestions on how to get hold of the PSA docs to review them? This post provides great insight into the process.
Brian- The servicer certainly won't let you see them. If they are recorded somewhere they would be a matter of public record or you can go to the shareholders meetings and request a copy of their PSA docs or they may be included in the shareholders investment package but I doubt that since most of these types of docs are done by attorneys and held by the legal depts at each perspective servicer and investor group. Katerina
Emily- My brother is an attorney and has told me forever that I should go to law school. I don't because even though I love law I won't be a part of a problem, you have to work too long and hard to make it. The average attorney makes 45k a year. Not exactly my idea of living:) However, I have represented myself in 4 civil matters and I won every time, 2 in court and 2 settled out of court because they figured I knew my rules of evidence, etc. I have spend countless of hours in the law libraries reading case law and statutes, etc. The latest case I was involved with- a long story- but when I sent in my counter complaint- the other side did not even show up for court- the judge came out and told me they voluntarily dismissed their case and I smiled:) I knew I was going to win! They were dead wrong and I was right on right! Love this stuff. Katerina
Wow Katerina, just wow. This is amazing. There's so much information here that is vital to agents/lenders/homeowners a like. I'm re-blogging this and sharing with my office.
Great info, thanks for the re-blog option. Let's spread the word to inform as many homeowners as possible.
Katerina- Excellent description of the whole process. It's too bad that it is hidden in mystery but as long as people like you keep telling it like it is then we will get the word out. We can help people if we continue to try.
Katerina- Great vital information worthy of your feature and the re-blogging. Thanks for spelling it out so clearly!
I am so looking forward to the govt over all response to what they plan on doing to ensure that this mess will not happen again although I think it will I just hope by that time I am retired
That is great info. I have negotiated quite a few short sales, but I still find it difficult to get the servicer to tell me who owns the note. Sometimes they will but most of the time they say they can not tell that. Do you have any specific verbiage that requires the servicer to give out that information?
Katerina - This is a really well written post and easy to understand, I'm sure a lot of people including myself will find it helpful. Thanks for taking the time to share this information.
Great Post and Great Explanation. Thank You!
Great Post and Great Explanation. Thank You!
Katerina,
I figured if anybody would know how to access PSA's it would be you. I've read some sample ones before and it's pretty dry stuff. I knew the details are hidden in them somewhere but it sounds like getting hold of them is an even bigger mystery.
Very comprehensive post Katerina. The entire lending structure is more complicated than most people think. As you have pointed out it's far more complicated than just saying "yes" or "no" to a loan mod or short sale.
What an excellent post. I've bookmarked it and am keeping it close by. Thank you for sharing your knowledge and insight.
Katerina - Great post but let's take it a bit further. When the loans were securitized there was insurance taken out called credit default swaps. The securitized loans were set up to fail and when they did the credit default swaps would pay out up to 30 times the value of the loan. 30 times the value!!!! The servicers were promised the properties as their part of the securitization scheme - if they keep you in default then it triggers the default payout - meanwhile Wall Street makes obscene amounts of money off the insurnace on the debt that they structured to fail in the first place. It wasn't if but when. Take it a step further and realize that iseveral different insurance payments paid off the debt but they call a default on the homeowner and take the home too. Read more at www.livinglies.wordpress.com
Brian - you can find the PSA's if you know the name of the Trust the loan is held in by going to www.secinfo.com and searching the company's 10K or 8K filings.
Katerina, illuminating post. I re-blogged it!
this is all very fascinating.. I had no idea all this goes on behind the scenes.
I got a relapse of a virus today so I fell asleep all day and night, now. Just stopped in to read more of your comments but have no strength to even address questions- I will as soon as I get over this bug.I love your comments and all the reblogsZ! 14 times so far! Keep it going! Katerina
We recently set up an office in Dubai so we can channel some buyers to REALTORS who have some luxury listings in Florida, the Hamptons and elsewhere in the U.S.
As we've grown a real estate office in Dubai, we quickly learned while western in some respects, the laws in Dubai are very different when it comes to debt there. If you are living there and your job was axed and you cannot pay off your mortgage or car... you can go to jail. We no longer have any Americans working the office there. We have U.A.E. people staffing our presence there now.
You lose your job, you then loses your work visa often inside a month. And if you have bills and you can't pay them off... you go to jail.
They have Debtors Prison over there. Thousands of cars get abandoned in the airport parking lot as people leave Dubai for jobs in back the U.S. or in Europe.
Not sure if anyone here know about that... Here's the story that ran in the NY Times....
- bart
Katerina,
What a comprehensive and clear explanation for so much of the frustration that has been encountered in this short sale/loan mod situation.
Awesome article Katerina. There are very few people that actually are even aware of things work behind the scenes in short sales and loan mods. As you mention in many cases the decisions made are not in the lenders control but an investor that owns the note.
HI Katerina,
This is all stuff that I know, but you've summarized it succinctly and beautifully so that any layman can understand it. I will definitely re-blog this!
Good work!
Kim Thomas
Great insight on how the process really is in the "real world". thanks for pointing it out because some home owners are so confused about the way it works!
This is a great explanation. More people need to hear this....I'll reblog it! Joy
Great Post!
Very informative! Thank You!
I've always said that if I'm the investor I would rather have a small piece of MY PIE than no pie at all. And my opinion is that the bail out $ we will all be paying for for years to come helped the bank to hold out on their side. Just what happened to all those BILLIONS of $ does anyone know?
Katerina--Excellent post regarding the reasonings behind many of the 'no modification' issues. Ifyou have not already done so, maybe any additional information you have come across regarding second mortgagesmight be helpful to post. Here in FL, you all experience A LOT of these challenges....and I believe it is extremely helpful to the other REAs who will soon be facing some of these issues soon in their communities. THANKS!!
There is good news!! -- The Making Home Affordable Program already creates a standard process, rules, and required paperwork. There is also a specific Net Present Value formular that loss mitigators must use to determine if a short sale will net the lender/investor more than a foreclosure...this may help with the "servicer reluctance " issue since the government is defining the formula. This should help the pressure off the servicer with regard to law suit concerns.
Making Hme Affordable covers more than 85% of all home loans.
Under the new program there is just one point along the loss mitigation process where a short sale will even be considered (after a loan modification has failed or not been feasible). Net effect -- a short sale attempt will be approved in advance by the servicer, the current guidelines provide for the loss mitigator to set the price and listing term. You still list with the borrower. Servicer/lender agree to not renegotiate commission at the contract stage-as long as it's not more than 6%. :)
Check if it's a Fannie Mae loan:
http://loanlookup.fanniemae.com/loanlookup/
Check if it's a Freddie Mac loan:
https://ww3.freddiemac.com/corporate/
To see if a servicer is participating in MHA Program:
http//www.makinghomeaffordable.com/contact_servicer.html
For more informaition and training on the Making Home Affordable program
www.CenterforAssetPreservation.com
Hope this helps!
Thanks for the great post. My area of discomfort (one of the areas) comes when we bail out large lenders with billions of dollars and then we can't even get our questions answered, let alone someone getting a loan modification. You have given valuable information to help clarify the situation, which I will share to other agents in my office.
HI Katerina,
You stole my thunder. But I have to say you delivered an eloquent masterpiece and a wealth of information that would have taken me hours if not days to research. Your blog was part of the subject of my next and final post on LM scams. But now I can get on with something else. I was getting tired of the whole LM debacle anyway.
The essence of my next post was/is really intended to address the long term remedy for this mess; if there is one. I still contend that in view of what you wrote and what I've researched the government sadly will eventually have to step in and deal with LM's once and for all and take the perogative away from the lending institutions all together. As long as their at the helm of the decision making process there will be total gridlock and very little reslove at best.
I can't believe that these words are comoing out of my fiscally conservative mouth but I just don't see any other way out. The other shoe hasn't even dropped yet. Wait until the Prime, Jumbo and commercial ARMS, IO's and Neg Ams attack with a vengence in the next couple of years.
Feel free to refer to my 3 chapter series on LM Scams and "The Other Shoe Hasn't Dropped Yet". The links are below. I'm not an inherently negative person and I've been a pretty successful entrepreneur since my mid 20's, (the 60-s) and have never seen anything like this.
I've been through 2 energy crisis' and 3 significant recessions and this mess takes the cake. Yes, we will eventually come out of this but a lot of folks are going to suffer extreme losses during the process and the American economic landscape of old will be an entirely different model in the future.
http://activerain.com/blogsview/1235113/loan-modification-companies-new-business-model-or-risky-scam-chapter-3-resources-for-home-owners-in-need-of-loan-modification-advice-
http://activerain.com/blogsview/1222626/loan-modification-companies-new-business-model-or-risky-scam-chapter-2-resources-for-home-owners-in-need-of-loan-modification-advice-
http://activerain.com/blogsview/1209735/loan-modification-companies-new-business-model-or-risky-scam-chapter-1-
http://activerain.com/blogsview/1203572/the-other-shoe-still-hasn-t-dropped
Awesome post! I have negotiated and closed dozens of short sale transactions and this has shed light on what is really happening when things go whacko. Thank you.
Thank you Katerina for a great post! I finally have a way to explain all of this to my clients in a way that they will understand. As always, your post was timely and VERY helpful to all of us.
Hope you feel better soon.
Thanks. This is just what I need, both for myself and my daughter, who is awaiting approval of her loan modification. Perfect.
Very interesting. As it stands now I would think they would worry about getting sued for not making the modifications. Often this would be in the best interest of the investor.
Katrina:
Thank you for helping me better understand the Loan Modification and Short Sale issues and insight into why 2nd lien holders don't cooperate with short sales. In Arizona we have Deficiency Judgment laws that protect borrowers who default on purchase money loans from recovery by lenders after the home is taken in a trust deed sale. Other states may not offer the same protections we enjoy here.
Thank you for emphasizing the key to being able to predict if the LM or SS will be successful is knowing if the investor is Freddie Mac or Fannie Mae. Well done!
The government can mitigate the impact foreclosures are having on our real estate markets by fixing them up, as they are starting to do now, to keep prices from declining further. Inflation may increase values enough for some sellers to be able to cover all their costs of sale, but other homes are so over encumbered, a short sale or foreclosure is the only viable alternative if they must sell any time soon.
I wanted to write and tell you that your blog in ActiveRain was rvery accurate. I was very happy to see such an understanding of how the process works from your perspective. I am a real estate attorney in Sarasota County, FL and I have been working on these matters for nearly four years now. What you are saying is accurate and I am glad to hear a realtor explain this so well. I have tried to tell other realtors that negotiating a short sale is not such an easy task and that they are taking on more liablity with their client then they should. But most simply ignor me and continue on. I have a number of the trust and pooling agreements and I would agree with the law shool study that you mentioned but I have not seen or heard of that study. Who did it? I also, typically keep the lenders federal regulator in the loop when I am negotiating these which on occasion has proved very helpful. When I push hard enough I have had decent results on MOds and great results on short sales. Thanks, Paul
Katrina, very well written and easy to understand post. Never realized what was actually happening and why. Thanks for your insight.
Great and very well written post!
This mirrors the frustration that we're seeing out here with respect to short sales. I think the more education we can provide our buyers and sellers the better prepared they will be for whatever the final outcome on the short sale or loan modification.
More great comments! Thank you all! I am still quite under the weather but this post is still alive and that is great. The more people we can help the better. The more that understand the process, the less ignorance there is on the issue. There are some points I wish to address in the comments as soon as I am feeling a bit better. So check back tonight or tomorrow. Katerina
Nestor & Katerina:
Thank you for this post. This is a prime example of the things that need to be explained to homeowners, mod experts, and short sale representatives the nation over.
This was informative, direct, & most importantly TRUE. It helps to shed light on the why's and how come's that we keep seeing everyone try to explain. Many homeowners and professionals like to blame the bank, but as you've pointed out its the NOTE holder who makes the final decision.
If you are a mod expert and are getting turned down on your loan mods, you are talking to the wrong people. Get to the investor!! Its been my experience that when the investor is in the hot seat, they make the right decisions. As in everything, you can't expect to get an answer or decision from those who do not have the power to MAKE those decisions. Its imperative to have the right contacts in this business to get the job done.
Again, well done Nester & Katerina. Keep up the great work!
Lots of good information. Thanks for keeping us up on things.
Fantastic post!!! Laid out perfect and very well put. Great job of making a very confusing topic something easy to understand.
It appears that some of the points can be elaborated on- I will be writing a post on why the process of working with second lien holders has become worse as time goes on instead of better and what are some of the things you can do about it.
This will also be in our short sale ebook that I am in the process of editing and adding some more chapters to.
I will be writing a post on getting to the investor and pmi company and an update to finding the note owners. So check back often or subscribe to our blog so that when I get these follow up posts up you won't miss them. Thanks for all your great comments and of course for reading the post.
Last count was 25 reblogs! Keep reblogging! That is viral! We love viral marketing!
Running into the same issue with the short-refis (same as short sale, but borrower stays in the home). Servicing companies hands are tied by the investors or layers of investors. More control and autonomy to the servicers would make all our lives easier.
Wow Nestor. Great explanation and great post. It demystifies much of the decision making process.
According to articles I've read on bankrate.com and other financial sites, the real culprits are the loan servicers.
When they modify a loan they are paid $1,000 up front and $3,000 more over the next 3 years. When the force the loan into foreclosure, they stand to gain much more. Apparently they're paid considerably more for servicing a loan in foreclosure because of the added work of arranging all the legal work, finding an agent to list it, negotiating with buyers, etc.
On top of that, they are either associated with or can get kick backs from the title companies - who have an opportunity to "triple dip" when a loan is in foreclosure.
Meanwhile, the homeowner loses, and the investor loses as well, because the investor is paying all these extra fees.
Thanks to you and your commenters for filling in the many blanks in a mysterious process that many of us don't understand. At least the part about "NO" and the back-&-forth finger-pointing.
Katrina, This is a great explanation. I will reblog if you do not mind. Hope you are feeling better!
Add me to your list of grateful rebloggers - thank you! One step I wish the lenders would take is to assign files to specific representatives. It seems to me that it would streamline the process as all account notations and paperwork files could be kept intact, rather than endlessly transferred around the company. A title company rep I know visited one of the loss mitigation departments of a large lending firm and said that the disorganization and volumnous stacks of paperwork was just mind-boggling. To her, it was know wonder that loan packages were deemed 'lost' to the consumer. Who could wade through all that stuff!
Katrina, it sounds like you may have seen this television special that talked about the part the investors played in this whole debacle. Here is the link in case you did not.
http://www.cnbc.com/id/28892719/
Katerina, just got back from the Maryland Real Estate Convention and was trying to catch up on Facebook - where I saw the link to this post. 'Probably woulnd't have gone back two days on Activerain, so I'm really glad I found this. Just goes to prove the value of putting links on other social media.
Great information, and, as always, presented in a manner that will catch and hold readers' attention!
Marte- The real losers are the shareholders of these investment groups- these are middle class retirement funds, mutual funds and IRA's and pension funds. These are the real losers. I would love to be able to show up at shareholder meetings and explain to them how they are getting screwed. The homeowner has a choice, a few choices actually. The shareholders do not except to take all their money out and be taxed on it which only screws them some more. The homeowner can file bankruptcy and start over again.
Excellent explanation, and it made things very clear for me. I had a listing last year that despite selling it three times, the servicer blamed the investor for not approving the short sale. It was as if the powers that be wanted it to foreclose. Now I have a better idea of what could have happened there. I'll be re-blogging this. Thank you!
I re-posted your article on a website for homeowners as I know many of them are ill informed on how mortgages work in general. As a homeowner trying to get the Making Home Affordable Modification, I can tell you that the process of even getting your file properly reviewed is a test of endurance and tenacity. I have been trying since April. I have finally gotten my file escalated to a negotiator only to find that the proposal he drafted did not satisfy the requirements for the government program. Under that program, first the NPV test is to be done and if the loan passes, then the terms of a modification trial are to be determined via a three step approach. My negotiator did not run the NPV test and only did two of the three steps. The target is to reach 31% of gross monthly income. He submitted an offer to the investor (Fannie Mae) that was 35% debt to income, not the 31% as detailed in the program guidelines. He never reached step three when he clearly should have. Not to my surprise, Fannie Mae rejected the proposal. I am thoroughly disgusted with the servicers' gross inability to comply with the guidelines. This has been nothing but an exercise in futility!
Thanks so much for this wonderful post.
And thanks SO much for speaking to me on the phone yesterday regarding my troubled short sale!
Katerina, what a fabulous post. So much is not understood of a borrowers loan on who really owns it. As you explained there are so many behind the scenes details that really can and do make all the difference in load mods and Short Sales. Very well written. Some people just have gifts in life and we know yours! Thanks for sharing.
Katerina:
The very first thing you need to do before you ask for a loan modification is to find out who actually owns your note. You can do this by calling who you make your mortgage payments to and asking them.
This is not always the case. I know first hand of an individual that tried this and was flat out told NO, they make their payments to the servicer and that's it. I can't believe that is legal, but I'm sure if we go through that mountain of forms we sign at a closing, it maybe in there somewhere.
Anyway, this individual finally did find the bank that had the loan, only to learn that portion of the the banks assests had been liquidated (I think the bank was, or went under) and they had no idea which loans went where.
Also, do you know how many states are non-judicial in foreclosure. Here in Georgia, we don't go through the courts...."you don't pay, you don't stay" is the joke line we often use, but when you are behind on your payments here in Georgia, the lender can simply foreclose on you with no type of court process.
I'd like to reblog your post, but want to make sure it's applicable here in Georgia. I think much of it is!
Thom- When our clients get the, "we can't tell you" - we tell them to hang up and call again and get a different person. They will find someone who will tell them. We have found out on every file we have, every single one of them and we have 40 to 50 listings at all times, closing 4 to 6 per month- we have yet to get a servicer to not oblige at some point.
Of course it may be easier in a judicial state such as Florida because here when you get served a summons and complaint the owner of the note has to be the one bringing the suit. The owner of the note has to be listed.
We also know people in high places and they will tell us who we are dealing with so that we know how to negotiate based on past experiences with that certain note holder/investor.
Here, if they can not find the original note- they can not foreclose. The judges are very much in favor on the homeowner in this regard.
While the laws differ from GA to Fl- the reasons for the 'no's are the same.
Katerina
Katerina, very well done explanation of a very difficult subject.
Short sales are less common in my market but I'm finding that they are ever increasing. I work w/a mediator to help the process but it certainly is frustrating to invest the time and effort only to be turned down! Great post
Nestor, is there a rule that the servicer has to reveal the investor? I called on my own to try and Wells Fargo told me that can't give out that information. All they can do is confirm who it is. I have to find that out myself.
Excellent post. Thank you for sharing this information. This is a topic to share at our up coming office meeting. Truly interesting. Thanks again.
Tim- Try to call again. When they say they can not give that info to you, hang up and call back and get a different person. We don't have issue if it is a fannie mae or freddie mac owned note but sometimes when it is a private investor they hedge to tell you. Keep on trying. You can also tell them that your attorney said that they must disclose this to you if you ask for it in writing within 30 days. Ask them where do you send the request. Keep pushing. Someone will tell you. Katerina
ATTENTION anyone facing possible foreclosure: check out www.naca.com! They are an incredible grassroots organization that holds large events around the country where they help hundreds or thousands of people get loan modifications. There's no cost!
The private investor issue is a hurdle, so I really appreciate your post.
Another great post. Thanks
Great article! My mom was turned down for a loan modification with her lender and was then scammed out of 4k by a company in Florida. She then hired an A rated company in Glendale, Arizona named Mortgage Assistance Group and finally got a real loan modiification. Their information is below. We as consumers should really start keeping track of the good guys in the industry.
Mortgage Assistance Group
www-mag-az.com
623-486-4505
Beautiful! Thanks for such a clear and consise explanation - I have forwarded your eloquent article along to one of my clients who I am just listing her SS because Chase would not play ball. The worst part is they string homeowners along for months saying "everything is fine - don't call us we'll call you if we need anything"...then BAM! Notice of Default on door, in mail. Homeowner is left scratching their head! My client called when she got the notice and when Realtors started knocking on her door and they told her she "failed" a loan modification 4 times. This was of course news to her because no one at Chase told her that before.
Thank you again!
Excellent explanation- this sheds alot of light on the process. I wonder why there aremnt more lawsuits against the servicers for truly NOT seeing to the needs of the investors. When they sell a home for $50k LESS as an REO than they had a short sale offer for... this is NOT looking out for the investor.
This article is so well written and easy for the consumer to understand. Thank you for sharing your great writing skills and knowledge on this subject! I have shared this with a current client that is trying (with no success) for a loan mod, and now we are discussing short sale. I would love for them to be able to remain in this home, as they have lived there for 30 years. Mom got talked into a loan she should have never been in and unfortunately they are now feeling the repercussions. So much more information in the comments as well. Thanks again!
Nestor & Katerina, Thank-You!
WOW! What A GREAT ARTICLE AND SIMPLIFIED READING!! Gulp!
The scary truth for homeowners and you just laid it out in black in white!
When I attended my CDPE Class they were saying about 1% of loans we getting modified.
It's the reality of what is going on today! You also featured in some Great information on the "PSA" ...thanks for the post!
Tom Davis
Hi guys!! What a wonderful post!! Your blog posts are always spot on!! Thanks for all that you do in the AR community!
Thank you for making comments months later:) That is awesome that this post is still being read! This post has been reblogged by 52 agents! That is just fantastic to spread this information for the consumers and homeowners as far as we can reach! Thank you again! Katerina
Katerina,
Just thought I'd stop by and say "Thank You" for all the information you shared on SMMCAMP! Much appreciated!
Kathy Opatka
Katerina,
This is a fantastic blog post that is not only informative, but easy to read and understand for both industry professionals and consumers. Some of my potential clients are often on the fence about doing a short sale or loan mod. They often ask me what I think about loan mods. Now I can direct them to this blog post and make sure that they understand why we hear so many horror stories about loan mods.
I did hear a loan mod success story from a friend of mine who was able to achieve one with AHMSI. Not sure who the investor was, but it took him almost a year to get some answers. Part of the issue was that the file got shuffled around between negotiators, and a couple of the negotiators didn't return phone calls, emails, etc. Anyhow, it's always great to have the info you provided at our fingertips, as well as have some success stories to keep our clients/customers thinking as positively as possible!
Thank you!
- Alicia Mendoza, Realtor/CPA - EPI, Inc. - Orange County, CA