Dear Ms. Warren,
Thank you for your efforts to report on the toxic asset issue in our nation.
First, let me say I believe you are fully aware of the risk that the toxic assets on (and off) the bank’s books pose to our economy. I am confident you have a “handle” on the scope and gravity of the situation. I also believe that you are able to communicate effectively with the institutions about this situation, allowing you to formulate your reports on this grave problem. Forgive my melodramatic tilt here, but it bears repeating. The situation is grave.
Please take a moment to listen to the problem of a little guy, with a small solution to a not so small part of the problem.
As a real estate agent in southern California, myself and a few of my bretheren across the country have taken on the task of helping homeowners out of their housing issues by way of short sale of their property. As you know, a short sale takes the bad paper off the books, resets the area market value, and gives a fresh start to all in a very short period of time. It does, however, discount the face value of the existing debt on the property. And herein lies the (monumental) rub…
Having done short sales for 14 years, I can tell you they are probably the most frustrating, no, infuriating, financial transaction that any real estate agent, homeowner, buyer, or affiliate professional will ever undertake. Some estimates indicate that 70-80 percent of the deals fail because of numerous factors which I will highlight here.
Lenders (a term I use to describle servicers, banks, MBS Investors, mortgage insurance companies) make it NEAR IMPOSSIBLE for the transaction to take place due to their policy of “stepping over dollars to pick up pennies”.
Here are a few of the deliberate manipulations of the little guy to extract a few more dollars:
• Insisting homeowner bring cash to the table to close the deal
• Insisting the homeowner sign a promissory note (with the obvious connotation of a future collections threat)
• Insisting on cutting real estate commissions
• Refusal to allow concessions in the transaction to settle all outstanding obligations (back taxes, HOA dues, local municipal costs)
• A systematic policy of stalling, delegating, and denying designed to take every deal to the brink so that those participants that do remain on board will agree to anything at the last minute to get the deal closed.
These policies are akin to an emergency room Doctor asking for the patients co-pay as he is about to apply the shock paddles to the patient’s heart.
While certainly there are manipulations of the system from the agent/homeowner side, I would contend that the medicine is definitely killing the patient. Again I point to the 70-80 percent transaction failure rate. These are above average agents with the intention of helping homeowners avoid foreclosure (albeit for a profit).
Ms. Warren, I implore you to recognize the potential to solve the toxic asset issue at the grass roots level. Please alert your contemporaries of this issue, and take the lenders to task on it. Here are some simple suggestions:
• Standardize the 2nd and subsequent lien holder percentage payoffs.
• Stop the policy of “going after the homeowner” with cash and promissory note threats
• Stop the policy of penalizing the professionals in the deal by cutting their commissions
• Insist on reasonable time lines for decisions. The industry is rife with stories of 10 month short sales due to lender uncooperativeness
It is my belief that if this particular problem, and the problems of those involved in it, were brought to light on a national, focused manner, and corrected, we could put a serious dent in the runaway toxic asset train. If the lenders would cooperate, in good faith, with this process, it would be a huge shot in the arm to the housing industry. We are all on the same team. Make the lenders realize that!
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