In response to an Activerain post this morning, here was my response. Note - the blogger was wondering if the lenders were being greedy by not working with longtime borrowers to ease the burden of their "alligator" mortgage:
Is it Greed? No. It is an economic rule that businesses fail. Little ones, and big ones. Their overall intent was not to rip people off, it was to be profitable.
However, times (and economies) change. The lenders have made billions of dollars of bad loans, and continue to do so. They are destined to fail. The real estate market continues to deleverage, the asset values continue to decline, and the burden of debt continues to rise.
The American taxpayer is about to get a very large tax bill, and they will pay it - till they can't.
Here is the question - what are you doing NOW to protect yourself? At my office, we are continuing to help as many people out of their no win mortgages as possible.
Saturday, December 31, 2011
Sunday, December 11, 2011
New Movement - "Occupy our Homes"!
National 'Occupy Our Homes' Day Kicks Off New Occupy Initiative
Courtesy Krista Franks - Default Servicing News
Last month the Occupy Oakland movement announced its intention to occupy vacant properties. On Tuesday, Occupy Oakland was one of 25 local Occupy groups to observe a national “Occupy Our Homes” day.
“This Tuesday, thousands will be standing up for their neighbors in a struggle against a system that places financial gain above the human need for shelter,” said a statement on the Occupytogether.org website prior to the event.
The statement referred to the trillions of dollars in loans the banks received from the Fed and the billions borrowed from taxpayers through TARP, and went on to say, “Homeowners take risks when buying homes; however, when they lose their jobs or are unable to afford their medical attention, they don’t get bailouts, they lose everything.”
Several Occupy movements made the first steps to occupy foreclosed homes or homes in the process of foreclosure.
Occupy Atlanta members started their day on courthouse steps in Fulton, Gwinnett, and DeKalb Counties.
“Over 200 Occupy Atlanta protesters descended on the Fulton County courthouse steps with whistles, sirens, drums, and blow-horns and made it as difficult as possible for the auction to continue,” according to the Occupy Atlanta website.
Protesters then visited the homes of two homeowners facing foreclosure to demonstrate their support and their intention to continue to occupy the homes despite foreclosure actions.
“This is only the beginning of the fight against Foreclosure and lack of housing in America,” states the Occupy Atlanta website.
Occupy Brooklyn members marched through a Brooklyn neighborhood “to liberate a foreclosed home,” according to their website.
Like the Occupy Atlanta movement, Occupy Brooklyn made it clear that this is just the beginning of a new initiative for the movement.
“This action is part of a national kick-off for a new frontier for the occupy movement: the liberation of vacant bank-owned homes for those in need,” stated a post on the Occupy Brooklyn website.
©2011 DS News. All Rights Reserved.
Courtesy Krista Franks - Default Servicing News
Last month the Occupy Oakland movement announced its intention to occupy vacant properties. On Tuesday, Occupy Oakland was one of 25 local Occupy groups to observe a national “Occupy Our Homes” day.
“This Tuesday, thousands will be standing up for their neighbors in a struggle against a system that places financial gain above the human need for shelter,” said a statement on the Occupytogether.org website prior to the event.
The statement referred to the trillions of dollars in loans the banks received from the Fed and the billions borrowed from taxpayers through TARP, and went on to say, “Homeowners take risks when buying homes; however, when they lose their jobs or are unable to afford their medical attention, they don’t get bailouts, they lose everything.”
Several Occupy movements made the first steps to occupy foreclosed homes or homes in the process of foreclosure.
Occupy Atlanta members started their day on courthouse steps in Fulton, Gwinnett, and DeKalb Counties.
“Over 200 Occupy Atlanta protesters descended on the Fulton County courthouse steps with whistles, sirens, drums, and blow-horns and made it as difficult as possible for the auction to continue,” according to the Occupy Atlanta website.
Protesters then visited the homes of two homeowners facing foreclosure to demonstrate their support and their intention to continue to occupy the homes despite foreclosure actions.
“This is only the beginning of the fight against Foreclosure and lack of housing in America,” states the Occupy Atlanta website.
Occupy Brooklyn members marched through a Brooklyn neighborhood “to liberate a foreclosed home,” according to their website.
Like the Occupy Atlanta movement, Occupy Brooklyn made it clear that this is just the beginning of a new initiative for the movement.
“This action is part of a national kick-off for a new frontier for the occupy movement: the liberation of vacant bank-owned homes for those in need,” stated a post on the Occupy Brooklyn website.
©2011 DS News. All Rights Reserved.
Thursday, November 24, 2011
The Golden Rule in Short Sales
Below is the Article I Wrote for the NSDREI Holiday Booklet this Year...
The Personal Side of The Short Sale
By Richard Worcester
In business, as in life, there is one simple rule for dealing with people. It’s called the Golden Rule – treat people as you wish to be treated.
As a real estate professional specializing in short sale negotiations, you have to be part psychologist and part negotiator as well as a real estate professional. The mission today is much more than just selling property. Now, ultimately we must point everyone in the direction of healing and financial recovery.
The Short Sale business is one of financial distress. When meeting with a client for the first time, they are probably going to exhibit frustration, or even hopelessness. Often, they have been hounded by creditors for months or even years. Their personal relationships may be have suffered or even been destroyed by the financial distress. The may feel as if all hope is lost. I always encourage my clients to mark this meeting, this point in time, as the time when we turned things around and began the healing process.
The first thing to do is to show compassion for their situation. Enter the psychology angle… Frankly, many of us could say “there but for the grace of God go I”. Let them know the facts. Millions of people are in the same position. Maybe you have even been there yourself? It is important to let them know that you are on their side, that you are not there to judge, but to help. This is not hard to do, as the opportunistic and predatory practices of the lenders are mostly responsible. If necessary and the client so far gone, I will even tell them to adopt the attitude of “Us vs. Them”.
Once you have developed a plan with the homeowner, you have to start negotiating with the bank. Although we believe that the financial industry is mostly responsible for the housing collapse, we don’t blame or punish the individuals that we deal with at the bank when negotiating the short sale. Again, the Golden Rule applies. The people at the bank are not so different from your clients or you. They did not cause the problem. They are tasked to help clean up the mess. They have a difficult job, and if you treat them nicely and with respect, they will respond generously.
Ultimately, you will get a short sale approval and will have to put on your Real Estate Professional hat. As in all other parts of the short sale business, the best way to deal with people again is via the Golden Rule. The real estate business today is dramatically different than it was just 5 years ago. Agents, mortgage professionals, escrow and title professionals, even contractors and tradesman, are working much harder, for much less money, than the “go-go” days of 2005. The key to success in these areas is to listen, try to understand, then act. Understand what is needed, and respect the time and feelings of the party you are dealing with. Since you were a child, you have heard the saying you catch more flies with honey than vinegar.
You will notice there is one thing missing from this narrative. I have not discussed how you get paid / how much you will make. The reason for this omission is clear. It is my position that you must separate the job you are to do from the process of getting paid. Certainly, going in, it should be clear what and how you will be getting paid. But once that is established, your focus should be on helping the people and resolving the homeowner’s problem. Your paycheck has nothing to do with the client and their situation. Your goal is to help your client sell their property and get out from under this suffocating financial burden.
I have told the story many times of being in the kitchen with the clients and jumping up and down and hugging each other when we got short sale approval, as well as the story of sitting down and crying with them when we have been denied help and foreclosed upon.
Working in the short sale business is a huge emotional as well as professional commitment. A significant part of your daily job is managing your own emotional involvement and attitudes. It is very, very easy to get on an emotional roller coaster, because you care. You want to help these clients, and they are counting on you. In fact, you may feel you are their only ally in this negotiation.
So in the short sale business, as in life, remember the one simple rule. The Golden Rule. Treat others in your business as you would like to be treated. You will be surprised how much happier and successful you will be!
The Personal Side of The Short Sale
By Richard Worcester
In business, as in life, there is one simple rule for dealing with people. It’s called the Golden Rule – treat people as you wish to be treated.
As a real estate professional specializing in short sale negotiations, you have to be part psychologist and part negotiator as well as a real estate professional. The mission today is much more than just selling property. Now, ultimately we must point everyone in the direction of healing and financial recovery.
The Short Sale business is one of financial distress. When meeting with a client for the first time, they are probably going to exhibit frustration, or even hopelessness. Often, they have been hounded by creditors for months or even years. Their personal relationships may be have suffered or even been destroyed by the financial distress. The may feel as if all hope is lost. I always encourage my clients to mark this meeting, this point in time, as the time when we turned things around and began the healing process.
The first thing to do is to show compassion for their situation. Enter the psychology angle… Frankly, many of us could say “there but for the grace of God go I”. Let them know the facts. Millions of people are in the same position. Maybe you have even been there yourself? It is important to let them know that you are on their side, that you are not there to judge, but to help. This is not hard to do, as the opportunistic and predatory practices of the lenders are mostly responsible. If necessary and the client so far gone, I will even tell them to adopt the attitude of “Us vs. Them”.
Once you have developed a plan with the homeowner, you have to start negotiating with the bank. Although we believe that the financial industry is mostly responsible for the housing collapse, we don’t blame or punish the individuals that we deal with at the bank when negotiating the short sale. Again, the Golden Rule applies. The people at the bank are not so different from your clients or you. They did not cause the problem. They are tasked to help clean up the mess. They have a difficult job, and if you treat them nicely and with respect, they will respond generously.
Ultimately, you will get a short sale approval and will have to put on your Real Estate Professional hat. As in all other parts of the short sale business, the best way to deal with people again is via the Golden Rule. The real estate business today is dramatically different than it was just 5 years ago. Agents, mortgage professionals, escrow and title professionals, even contractors and tradesman, are working much harder, for much less money, than the “go-go” days of 2005. The key to success in these areas is to listen, try to understand, then act. Understand what is needed, and respect the time and feelings of the party you are dealing with. Since you were a child, you have heard the saying you catch more flies with honey than vinegar.
You will notice there is one thing missing from this narrative. I have not discussed how you get paid / how much you will make. The reason for this omission is clear. It is my position that you must separate the job you are to do from the process of getting paid. Certainly, going in, it should be clear what and how you will be getting paid. But once that is established, your focus should be on helping the people and resolving the homeowner’s problem. Your paycheck has nothing to do with the client and their situation. Your goal is to help your client sell their property and get out from under this suffocating financial burden.
I have told the story many times of being in the kitchen with the clients and jumping up and down and hugging each other when we got short sale approval, as well as the story of sitting down and crying with them when we have been denied help and foreclosed upon.
Working in the short sale business is a huge emotional as well as professional commitment. A significant part of your daily job is managing your own emotional involvement and attitudes. It is very, very easy to get on an emotional roller coaster, because you care. You want to help these clients, and they are counting on you. In fact, you may feel you are their only ally in this negotiation.
So in the short sale business, as in life, remember the one simple rule. The Golden Rule. Treat others in your business as you would like to be treated. You will be surprised how much happier and successful you will be!
Sunday, January 02, 2011
Servicers at the Root of the Housing Crisis Now
Courtesy the New York Times
All the revelations this year about dubious practices in the mortgage servicing arena — think robo-signers and forged signatures — have rightly raised borrowers’ fears that companies handling their loans may not be operating on the up and up.
But borrowers aren’t the only ones concerned about potential mischief. Investors who hold mortgage securities are increasingly worried that servicers may be putting their interests ahead of those who own the loans.
A servicer might, for example, deny a loan modification to a borrower because it also owns a second mortgage on the same property and doesn’t want to write down that asset, as required in a modification. Levying outsize default fees is another tactic — the fees typically go to the servicer, not the lender, but they can still propel a property into foreclosure more quickly. And foreclosures aren’t a good outcome for investors.
Last week, a jury in federal district court in Reno, Nev., awarded a group of 50 mortgage investors $5.1 million in punitive damages against defendants in a loan servicing case. Although the numbers in the case aren’t large, its facts are fascinating. Indeed, the case exposed some of the tricks of the servicers’ trade.
The case is also notable because the main defendant, Silar Advisors, was one of the institutions that struck a deal in 2009 with the Federal Deposit Insurance Corporation to buy the assets of a notorious failed bank, IndyMac. Of the $5.1 million in damages awarded in the case, Silar must pay $3 million.
John W. Bickel II, a co-founder of Bickel & Brewer in Dallas, represented the investors in the case. Because he represents an additional 1,450 investors whose loans were serviced by Silar, he said more suits like this one would follow soon.
Loan servicers act as intermediaries between borrowers and their lenders, collecting monthly payments and real estate taxes and forwarding them to the appropriate parties. As long as borrowers meet their payments, such operations typically run smoothly.
Defaults and foreclosures, however, complicate servicers’ duties. As the Silar matter shows, borrower difficulties also open the door to improprieties.
Because loan servicers operate behind the scenes, it’s hard for investors who own these mortgages to monitor fee-gouging. In addition, the servicing contracts make it difficult to fire administrators — under a typical arrangement, investors holding at least 51 percent of the loans must agree on termination.
In short, loan servicing is a perfect setup for administrators who want to take advantage of both borrowers and lenders.
Troubles for investors in the Silar matter began back in 2006 when the USA Commercial Mortgage Company went bankrupt. Founded in 1989, the company had underwritten and serviced short-term commercial real estate loans. It sold them to private investors, typically older people who hoped to live off the income generated by the loans. At the time of its bankruptcy, USA Commercial serviced 115 loans worth almost $1 billion.
After the company collapsed, a small firm called Compass Partners bought the servicing rights to these assets for $8 million. A short time later, Silar Advisors, a company overseen by Robert Leeds, a former Goldman Sachs executive, got involved by financing Compass. Compass/Silar began servicing the loans for the investors.
Almost immediately, the plaintiffs in the suit contended, Compass/Silar started siphoning off money owed to investors holding the loans. Among the servicer’s tactics, the plaintiffs said, were improperly charging default interest, late fees and loan origination fees that reduced amounts due to investors.
The investors also said that when borrowers tried to pay off or otherwise resolve defaulted loans, Compass/Silar refused to negotiate. In other cases when Compass/Silar urged the investors to modify troubled mortgages, the servicer reaped undisclosed fees in the deals.
THE jury affirmed every claim the plaintiffs had brought against Compass/Silar, including conspiracy, as well as breach of contract, of fiduciary duty, and of good faith and fair dealing. The jury found improper actions by Compass/Silar on eight loans.
A Silar spokesman said the firm was pleased that the jury awarded only $79,000 in compensatory damages to the plaintiffs but was disappointed by the punitive-damages assessment. “The jurors are to be commended for their careful consideration of the facts in a very lengthy trial,” the spokesman said. He declined to comment as to whether Silar was currently servicing any loans.
One loan history, on a defaulted asset known as Standard Property, indicates what these investors were up against with their servicer.
In March 2007, immediately after Compass/Silar took over administration of the investors’ loans, the Standard Property mortgage had a principal value of $9.64 million. The borrower wanted to repay the loan at that time, but instead of directing it to pay principal and the accrued interest to the holder of the loan, as required by the servicing agreement, Compass/Silar arranged for the borrower to refund only the principal.
At the same time, court papers show, Compass/Silar quietly took in almost $860,000 in late fees, default interest and other costs from the Standard Property borrower. This ran afoul of the servicing agreement governing the Standard Property mortgage. The agreement stated that such fees could go to the servicer only after investors had been paid principal and accrued interest on a loan.
“No one really knows what is in the black box known as loan servicing, and most investors don’t even think of their servicer taking advantage of them,” Mr. Bickel said in an interview. “There’s not a lot of transparency, and I think this case is going to bring to the forefront the potential for abuse.”
It is obvious that we are in the litigation stage of the financial debacle of 2008. That usually means shining the light on dark corners and watching what scurries away. The view may not be pretty, but at least in this case, investors got some recompense in addition to an education.
All the revelations this year about dubious practices in the mortgage servicing arena — think robo-signers and forged signatures — have rightly raised borrowers’ fears that companies handling their loans may not be operating on the up and up.
But borrowers aren’t the only ones concerned about potential mischief. Investors who hold mortgage securities are increasingly worried that servicers may be putting their interests ahead of those who own the loans.
A servicer might, for example, deny a loan modification to a borrower because it also owns a second mortgage on the same property and doesn’t want to write down that asset, as required in a modification. Levying outsize default fees is another tactic — the fees typically go to the servicer, not the lender, but they can still propel a property into foreclosure more quickly. And foreclosures aren’t a good outcome for investors.
Last week, a jury in federal district court in Reno, Nev., awarded a group of 50 mortgage investors $5.1 million in punitive damages against defendants in a loan servicing case. Although the numbers in the case aren’t large, its facts are fascinating. Indeed, the case exposed some of the tricks of the servicers’ trade.
The case is also notable because the main defendant, Silar Advisors, was one of the institutions that struck a deal in 2009 with the Federal Deposit Insurance Corporation to buy the assets of a notorious failed bank, IndyMac. Of the $5.1 million in damages awarded in the case, Silar must pay $3 million.
John W. Bickel II, a co-founder of Bickel & Brewer in Dallas, represented the investors in the case. Because he represents an additional 1,450 investors whose loans were serviced by Silar, he said more suits like this one would follow soon.
Loan servicers act as intermediaries between borrowers and their lenders, collecting monthly payments and real estate taxes and forwarding them to the appropriate parties. As long as borrowers meet their payments, such operations typically run smoothly.
Defaults and foreclosures, however, complicate servicers’ duties. As the Silar matter shows, borrower difficulties also open the door to improprieties.
Because loan servicers operate behind the scenes, it’s hard for investors who own these mortgages to monitor fee-gouging. In addition, the servicing contracts make it difficult to fire administrators — under a typical arrangement, investors holding at least 51 percent of the loans must agree on termination.
In short, loan servicing is a perfect setup for administrators who want to take advantage of both borrowers and lenders.
Troubles for investors in the Silar matter began back in 2006 when the USA Commercial Mortgage Company went bankrupt. Founded in 1989, the company had underwritten and serviced short-term commercial real estate loans. It sold them to private investors, typically older people who hoped to live off the income generated by the loans. At the time of its bankruptcy, USA Commercial serviced 115 loans worth almost $1 billion.
After the company collapsed, a small firm called Compass Partners bought the servicing rights to these assets for $8 million. A short time later, Silar Advisors, a company overseen by Robert Leeds, a former Goldman Sachs executive, got involved by financing Compass. Compass/Silar began servicing the loans for the investors.
Almost immediately, the plaintiffs in the suit contended, Compass/Silar started siphoning off money owed to investors holding the loans. Among the servicer’s tactics, the plaintiffs said, were improperly charging default interest, late fees and loan origination fees that reduced amounts due to investors.
The investors also said that when borrowers tried to pay off or otherwise resolve defaulted loans, Compass/Silar refused to negotiate. In other cases when Compass/Silar urged the investors to modify troubled mortgages, the servicer reaped undisclosed fees in the deals.
THE jury affirmed every claim the plaintiffs had brought against Compass/Silar, including conspiracy, as well as breach of contract, of fiduciary duty, and of good faith and fair dealing. The jury found improper actions by Compass/Silar on eight loans.
A Silar spokesman said the firm was pleased that the jury awarded only $79,000 in compensatory damages to the plaintiffs but was disappointed by the punitive-damages assessment. “The jurors are to be commended for their careful consideration of the facts in a very lengthy trial,” the spokesman said. He declined to comment as to whether Silar was currently servicing any loans.
One loan history, on a defaulted asset known as Standard Property, indicates what these investors were up against with their servicer.
In March 2007, immediately after Compass/Silar took over administration of the investors’ loans, the Standard Property mortgage had a principal value of $9.64 million. The borrower wanted to repay the loan at that time, but instead of directing it to pay principal and the accrued interest to the holder of the loan, as required by the servicing agreement, Compass/Silar arranged for the borrower to refund only the principal.
At the same time, court papers show, Compass/Silar quietly took in almost $860,000 in late fees, default interest and other costs from the Standard Property borrower. This ran afoul of the servicing agreement governing the Standard Property mortgage. The agreement stated that such fees could go to the servicer only after investors had been paid principal and accrued interest on a loan.
“No one really knows what is in the black box known as loan servicing, and most investors don’t even think of their servicer taking advantage of them,” Mr. Bickel said in an interview. “There’s not a lot of transparency, and I think this case is going to bring to the forefront the potential for abuse.”
It is obvious that we are in the litigation stage of the financial debacle of 2008. That usually means shining the light on dark corners and watching what scurries away. The view may not be pretty, but at least in this case, investors got some recompense in addition to an education.
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