Greetings! Here is my opinion and question. I have taken short sale courses, have read many articles and am now in active short sales…two actually. For the life of me I cannot figure something out…from the time of the initial short sales start to the time of actual approval or acceptance, the time is so drawn out…the lender asks for this or that or several other things or appears to just delay…YET we went to hear a loss mitigator speak about what we needed to do as investors. That we can get this deal done and they are looking for a good deal as well. NOw this was before the foreclosure tsunami! I just dont get the time line. The mitigator said the opposite of what actually happens. I KNOW that in the business I use to manage, we had to clear our books by the end of our fiscal year…and I am told the real estate market is similar. If this is so…how are the lenders able to keep these houses on their books for such long periods of time, and still be ok financially? We were told that for every house in foreclosure the lender must keep twice or triple the amt of money in reserve? Doesnt compute! can anyone tell me their opinion or knowledge in this. thank you so much…
Well, the simple answer is that probably back when you were in that seminar, there were very little short sales coming into banks and they were adequately staffed to deal with it. Now, there is severe back log and staffing shortages in all the major banks and servicers. Now, I can see how LM’s and former LM’s want to come out at seminars and cheerlead investors and realtors on to short sales, but while they were on the other side (employed by the lender/servicer) it was their job to get the biggest recovery from the short sale for the bank as well as fulfill all the auditing and documenation requirments of their employers. It think it’s silly of those LM’s at those seminars not to be upfront and honest about the TOTAL BEAURACRACY of Loss Mitigation at mortgage companies!
The other factor is that there is another layer of approvals that must be met before a short sale is approved. That approval must come from either the insurer of the mortgage or the secondary market owner of the loan. Each layer will have their own requirements for documentation. Some secondary markets must report their losses as their books close, others have the ability to place losses “off balance sheet” depending on the amount.
There is no direct link between the original mortgage payment amount and whether keeping twice or 3x’s the amount is what they need in reserve. The “cost of carrying” is based on how much that particular loan costs the company in available $$ to lend or invest. This is expressed in interest rate form and is tied to the bank discount rate - which is dictated by the Fed and central banks.
Thanks for that informed answer and I agree with you! I have said there is something not being told here…I just knew it. Because the info we received didnt compute…and it is all to get us inetersted in doing what we are doing…what I also beleive is if honesty isnt the first priority then I am not impressed. The truth s about these deals… is that they take or can take long amounts of time and if one is willing to ride out the time it is worth it! I just wish someone would tell the truth iin these seminars and tell exactly what goes down for real! I have seen the deals done enough and I am in several myself that many of these coaches and mentors arent saying it ALL! Thanks again and I am quite satisfied with your honest answer!