Posts Tagged ‘Lenders’
Monday, September 19th, 2016
I don’t know if it’s just bad luck, but I have been having MAJOR issues with lenders lately – messing up (and almost killing) escrows at the 11th hour. (I should say that these mistakes are not from MY preferred lenders, but from lenders whose clients are purchasing my listings). Here is what I know: lenders are held to high standards, most importantly they must check all paperwork and needed documentation during the buyer’s loan contingency process. Here are some of the dumb things that I have seen lately from buyers’ lenders:
1. Not checking buyer documentation. I had a lender this past week that on the day of the loan contingency removal deadline realized that there were two parties to a trust for which they based funds going into the loan. Now I have to assume that they had a copy of this trust for 21 days, and that they vetted it to make sure their borrower qualified. However, on day 21 I find out that they “just realized” that there were 2 trustees, not one, and therefore the borrower actually had half of the money to his name instead of the whole trust amount, on which they based approval.
This is unacceptable folks! These are basic inquiries a lender needs to make when processing a loan! How could the lender not have known the borrower’s stake in the trust when it should have had that trust documentation, which clearly identifies trustees and is a vital document when funds are coming from it?! Unbelievable.
2. Sending over loan docs with a change in borrower names. Believe it or not, a lender this past week sent over loan docs to escrow to be signed by the buyers, with closing slated for the following day (which happened to be a Friday so there was no room for screw-ups). The problem was that the docs had DIFFERENT buyer names than the contract/escrow documents – they basically eliminated a buyer! Now, I don’t know about you but it isn’t rocket science – it is pretty basic common sense that if you have a contract between parties, you cannot just change or eliminate the name(s) of a party without proper documentation (it also happens to be the law). Lenders KNOW this!
Suffice it to say that in this particular case escrow and I had to jump through hoops and the lender had to re-draw docs at the 11th hour. It was very stressful. This is absolutely unbelievable. The lender has copies of the contracts and all documentation relating to the purchase agreement. For them to do something like this is just crazy.
The moral of my crazy lender scenario week is that there are often problems in a real estate transaction, so prepare for them. But those who are charged with qualifying borrowers need to be much more careful. Things like this should not be happening. This past week was officially named by me “lender screw-up week.” I sure am glad those lenders that I work with are so on top of things, and hope to never work with either of these particular lenders again.
Wednesday, November 13th, 2013
I used to love short sales…all it took was great organizational skills, persistence, a thick skin and a big mouth, and it was more or less simple to get a short sale closed. But after what my poor buyers just went through it makes me want to stay away from short sales for a while!
First of all, I have to say that I had the sweetest buyers one could imagine – kind, honest, and abundantly patient homebuyers who were so excited to buy their first home. They waited SEVEN months to get their home, and during this time saw just about every mistake a lender can make. The list is long, but here are a few of the mistakes either one or both of the short sale lenders made: failure to disclose the loan was being transferred (we could have had it postponed and closed months ago if they had been upfront, instead we had to start ALL over with one of the loans), misplacing the file in the wrong category (the second put it in the “first lender” category, which is a much longer process and thus held things up until it was discovered by the listing agent), granting approval and then not signing off on the paperwork before the deadline to close expired, and failure to sign off on the final HUD until the last minute possible – literally – and even that took multiple calls and threats to obtain.
Something to ponder: if a lender agrees to approve a short sale, and especially if that lender requires closing occur on or before a certain date, why would the lender hold off on getting the right paperwork to the listing agent so that can be accomplished? All parties in the transaction bent over backwards every time one of the lenders asked for something, yet the continued to not hold up their end of the bargain. In fact, it was so bad that we would get one approval, and by the time the other lender send over the approval the first one expired…this happened several times and we were constantly waiting for someone’s approval letter (while the lender whose letter was still valid was threatening to not renew it because we were taking so long!)
The icing on top of the cake came after we finally closed, when one of the lenders demanded original documents (they were sent the copies during escrow and specifically stated they did not need the originals), threatening to refuse to accept the escrow money if they did not receive it. Luckily all the parties – buyers, sellers and both agents – had saved their originals and that crisis was averted (lesson to remember: don’t ever throw anything away!)
Short sales can be horrible, or they can be easy. It is always a gamble to take on a short sale, and one must truly be patient. As a buyer’s agent you have no control over the banks and are not allowed to contact them, which makes me crazy. If you are contemplating a short sale purchase, make sure you understand all possible ramifications so that you are not surprised.
Congratulations to my clients for sticking it out and standing their ground – I know they will enjoy their beautiful new home!
Thursday, June 20th, 2013
Over the ten years I have been selling residential real estate there have been many questions that I could label “million dollar questions,” but perhaps the number one question is why do lenders hold up closings? Granted, if I had a proverbial crystal ball I could probably help relax many inquiring minds, and I definitely would not have as many gray hairs! Let’s look at some of the reasons lenders hold up closings.
1. Too many people, too little training. Big lenders have many employees. In most cases one would think that with so many employees the company would be more efficient, right? But this is not the case with big lenders. All those people actually make getting a loan approved and closed MORE difficult. I have been trying to figure this one out for years, so I will chalk it up to a lack of internal communication (see below), training and a BIG disregard for deadlines. It is no wonder most Americans despise working with big lenders.
I do have a solution to the above issue, and to me it seems simple but of course I think in black and white. Departments should be created where people are trained to do only one or two specific jobs. They do their part and the loan processing then moves to the next department, almost like a conveyor belt, until all the steps are completed. The lenders would save money by streamlining the process, and escrows would close sooner (or at least on time – what a concept!!)
2. Failure to communicate. This category goes hand in hand with number 1. Big lenders not only have a hard time with internal communication, but they have just as big an issue with communicating between real estate agents and mortgage professionals. In fact, with one sale I have pending right now, the lender (Citibank) asked me – the listing agent – and the buyer’s agent to refrain from communicating with them during the loan processing! Part of the reason I can offer great service to my clients is because I stay in constant communication with all parties involved in closing the sale, so this went against my ability to provide great service and frankly, made me upset (I definitely won’t be referring any of my buyers to Citibank’s mortgage department). As a result of this lack of communication we are not going to close late. Unbelievable – or perhaps I should say “believable, but very, very upsetting.”
3. No Oversight. This is not a new realization. Lack of lender oversight has been a complaint for decades. In fact there was an article in the paper this morning about big lenders violating the terms of the $25 billion national mortgage settlement (the agreement to clean up shady foreclosure practices). What a surprise! The list includes Citigroup, Bank of America, Wells Fargo and JP Morgan Chase. Where is the oversight, and why can these big banks do whatever the heck they want? This is a disgrace, especially for America as a nation.
I am sure there are many other reasons I could add to the list, but I think this is a pretty accurate description of what is going on in our lending industry, at least with the big banks. I have not had these issues with smaller lenders, in-house mortgage lenders or credit unions. This particular blog also did not discuss why lenders hold up short sales – an even more mysterious question (and one that I have written about several times). I sure wish these big banks would clean up. Not only would it make real estate a more pleasant business, but it would also help the housing market and allow more people to buy homes.
Wednesday, November 16th, 2011
Just when you think you’ve heard it all, something happens that makes you realize you should never close your mind to how far out of left field the ball might fly (a little baseball analogy for those sports fans to appreciate). It seems that is definitely the case with banks, and wait until you hear what the latest hurdle is…unfortunately I know from personal experience that this in fact is happening.
Last week my investor client, who was getting a loan to purchase a property, was told we were ready to draw docs on a Bank of America funded loan. We had been given the thumbs up from the lender, the appointment was set for the buyers to sign at the escrow office that afternoon, and we were just awaiting docs to arrive at escrow. Then my clients’ mortgage professional received the phone call from the lender: there are no funds currently available to fund this loan. He was told they would be available in approximately 5 business days.
Now, had this transaction been a traditional sale this may not have made any difference. But being a short sale, with a deadline established by the short sale lender by which we needed to close (or risk the home going to foreclosure), we didn’t have 5 business days. My buyers had to close with cash at the last minute. Luckily, they were able to do so, but my buyers were not happy about this.
Is this crazy or what? Those of you who know me know that I have been singing Bank of America’s praises for the past few months – I have blogged about how they really seem to be helping close short sales faster. But this – this is a big step backwards for the lender. Last minute bombs like this could decimate the ability and desire to buy property.
The inside scoop. Here is how it happened. B of A decided to shut down lending channels to mortgage servicers who sold their products, deciding that only B of A would be able to sell B of A loans. How many loans were effected is unknown to me, but I bet there have been some serious situations lately that could lead to lawsuits.
Realistically, this could lead to a slew of litigation. It could put buyers in breach of their real estate contracts if they are not able to close on time. They risk losing their initial deposits, and the monies they paid for home inspections, appraisals and other expenses. In the case of short sales, as mentioned above, if the short sale lender did not extend the deadline last minute due to such an issue, the home would go to foreclosure. Bad for sellers, bad for buyers, bad for the market.
For an in depth understanding of what happened I suggest you read this blog from my colleague Michael Mekler. This has been a fine example of another blow to the housing market, brought to you courtesy of our nation’s lenders. Hopefully they will reverse their decisions and we can get back to the business of selling real estate via cooperation and a common goal to heal the market and help people purchase real estate.
Friday, October 21st, 2011
You have heard the famous line, “it’s all who you know.” That has proven to be true in many cases – getting a reservation at a swanky new restaurant, upgrading to a better hotel room, getting a great job or a promotion over others who may be more qualified….but who would ever have thought that getting a home sold through the short sale process could be added to this list?
Recently I had a short sale offer approved by a major lender, after months of arguing with them on the issue of price. You see, the lender had a bad BPO (Broker Price Opinion, which is much like an appraisal yet is created by a real estate agent who is certified to do so). I sent them comparables and even analyzed them, but the lender refused to believe what was in black and white. Since lenders have no obligation to share the BPO with the listing agent I was not made privvy to it, but unless there were some magic comparables of which I was not aware, they did not exist.
After months of arguing and of lender demands that the contract price be raised tens of thousands of dollars over comparable value price, the lender denied the short sale. It must be mentioned here that two months before, the lender had accepted a previous offer that was much lower. How could this property have increased thousands of dollars in such a short time, when prices have dropped?
The buyer of my short sale listing happened to have a contact at the bank who holds the loans on the property, and she called in a favor. The executive was surprised at his bank’s demands, and agreed that the second BPO had to be incorrect. With a few calls he was able to help us out – something the bank negotiator was unable and unwilling to do.
As happy as I am that my sellers and the buyer are now able to complete this sale, I am also furious. There are countless sellers out there who are not afforded the opportunity to short sale their homes, and the qualified buyers who cannot purchase them, because of bad information and unqualified bank representatives. It took a connection with a higher-up to get this home into escrow. There is something very wrong with this picture.
Situations like this are plaguing the housing market. Lenders need to not just believe what a BPO states, as the agents who prepare them are not appraisers. If the listing agent sends over valid comparable data the lender needs to have a qualified individual verify the discrepancies, not just turn down the sale and refuse to have a dialogue to rectify the differences. It should not be about who one knows…these lenders need to stop this insanity.
Thursday, October 20th, 2011
There have been quite a few crazy ideas proposed by the Feds to help the housing market, but in the recent panic to finally DO something, the latest proposal takes the cake: make lenders landlords.
As the number of lender-owned properties continues to rise, and as lenders remain hesitant to release them to be sold (mostly for fear of what it will do to the housing market and, more selfishly, because declines in prices will not net them as much as they might get in an improved market), the fact is that we are seeing less of these properties on the market. Lenders who own hundreds or thousands of homes need to find solutions, and quickly.
One proposal is that lenders of unoccupied homes that are held by the government should rent out these properties. This idea has received both criticism and accolades.
Proponents: Those who applaud the idea say that doing so will help neighborhoods by preventing vacant homes, unkempt landscape and neglect, and vandalism. It will put people in homes, which will benefit neighbors and prevent prices from declining by withholding these properties from the sales market.
Opponents: These people claim that lenders should stay out of the rental market. First of all, they do not have the manpower to dedicate to customer service (of course they should hire property management companies, but might choose not to do so to save money). Furthermore, they claim that putting renters in these properties will not have any positive effect on the neighborhoods, as the renters may not have the same respect for the neighborhood as owners.
Twist: owners to renters: There is one possible exception that may make sense: renting the foreclosed homes back to the foreclosed homeowners. This is a good way to prevent throwing millions of people out of their homes, and will likely keep these homes in better shape, compared to letting them sit vacant or finding renters. Maybe there could be a possibility of re-purchase down the road if the homeowners can show they meet qualifications (although I doubt lenders will go for this one). This is an idea I will support.
I believe that renting out these properties is only postponing the inevitable (noting the exception for owners-to-renters). The better solution is to sell these properties off now, get rid of all the excess distressed inventory and let us move on. As I have said many times, we cannot move forward and get back on track to a “normal” housing market when there is a plethora of inventory that needs to be taken off the books. It is not until we eliminate the overwhelming inventory of distressed properties that we can see the light at the end of the recovery tunnel.
Wednesday, October 12th, 2011
Not all short sales get approved; in fact, some statistics claim only half make it to closing. The truth is that both the agent and seller need to do everything in their power to get these sales approved, but sometimes it is simply out of their hands. Here are the reasons short sales fail:
1. Incomplete paperwork. A short sale agent needs to know what paperwork to get to the lender. Oftentimes paperwork is needed before the home is even listed, and this is lender-dependant. Bank of America, for example, has a new program where they evaluate short sales before listing, and TELL the agent where the price needs to be. An agent must be aware of this before placing a listing on the MLS. Different lenders also require different paperwork, and paperwork may vary depending on whether the loan is a first or subsequent lien. Make sure your agent knows what is needed, and complete all the paperwork on time – this is the easiest problem to fix, and the one over which we have the most control.
2. Under-skilled agents. If you are facing a short sale, you’d better make sure you have a competent agent who understands all the steps involved, and can communicate (and knows when to do so) with the lender. Many agents claim they are short sale experts, but taking a one or two day class does not make them experts – much of this comes from experience.
3. Lack of communication. This is where the listing agent, although skilled in working with negotiators, is not on top of the transaction and is not communicating with negotiators properly, or frequently enough. This can happen whether or not the agent is skilled with short sale transactions. If the agent is too busy, there are plenty of highly trained and successful negotiators that can negotiate with the lenders on behalf of the agents, and the agent pays them from his/her commission.
4. Bank negotiators who are under-skilled, uncommunicative, and/or just don’t care. This is the number one reason I personally think short sales fail. Oftentimes an agent will encounter bank representatives who don’t have the skills to do their job (I have had people quote me incorrect law -let’s just say they received a lesson); some of these people either don’t know how to communicate, or simply choose not to (obviously not caring about all the lives their actions effect). Recently, I have been involved with a short sale in which the bank negotiator did not return calls or emails. It was impossible to communicate with her, and then she simply closed the file! The lenders need to hire skilled people, train them, and constantly evaluate them. These people work in CUSTOMER SERVICE! Do these lenders not understand the meaning of this (this is a topic for a blog in itself, and it wouldn’t be a nice one).
According to an article in California Real Estate Magazine, a JD Power and Associates recent study found that 77% of California Realtors found recent short sale transactions to be either “difficult” or “extremely difficult.” This number is up from the last survey, almost a year ago, which was at 70%. Furthermore, the same study reported that 75% of Realtors were not satisfied with lenders they worked with in their most recent short sale transactions. Consumer satisfaction with primary mortgage servicers was ranked at 718 on a 1,000 point scale. This is crazy!
Lenders: I feel like I have been shouting at you for so long…many people have. Why are you not listening? What will it take to make you hear us? You hold the cards to housing market recovery, yet you choose not to care. You have created a country of bank-haters, people no longer trust you. Financial markets teeter on the brink of disaster, and yet you still follow the same practices. Why? Can anyone help me to understand this? Let’s hope these lenders listen before it’s too late.
Monday, October 10th, 2011
Cash for keys programs – where the banks pay money to the homeowners if they walk away from their homes and leave them in good condition – have been common in the foreclosure arena for some time. Now the banks want to apply this principle to the short sale industry. I have been hearing tidbits about this for about a month now, but a weekend article in the San Diego Union Tribune confirms that this is now official.
Major lenders, like Chase, Wells Fargo, Bank of America and others, have apparently begun offering cash to distressed borrowers in order to get them to agree to short sale their homes – up to $35,000 in some cases. Before you get all excited and pick up the phone to call your lender, you need to be aware of how this process works. As with any bank program, the bank controls the process, and you cannot simply call and opt into the program. Apparently the bank reviews distressed situations and contacts the homeowner. The money is paid at the close of escrow of the short sale.
How this system makes sense at all to the banks, who choose the lucky homeowners, is baffling. I find it hard to believe, as I am in the middle of a battle right now with one of these big lenders, just to get them to accept a buyer’s offer on my short sale listing that is perfectly in line with the comparables. But of course, some bank decisions remain and will always remain a big mystery.
My hope is that these lenders are finally realizing that it is up to them to fix the housing crisis, and that they need to get rid of all their distressed inventory to do so. Maybe some angel descended down and landed on the shoulders of the bank CEOs. Ah, but I know better: with the banks, it is all about how much they can make. They must be finally realizing that foreclosure costs them too much money, so giving away a few thousand dollars and blessing more short sales will save them in the long run. Banks don’t do anything because they care about people.
It will be interesting to watch this one, to see how many people actually get “chosen” to be involved with these programs. If you are one, please let me know. I will protect your privacy, but would love to know how the process goes, and whether it is as smooth as the banks say it will be. The proof will be in the pudding, so I am looking forward to seeing how many homeowners are truly helped by this latest lender brainstorm, and truly hope it helps.
Sunday, October 9th, 2011
A client told me a few days ago that I have one of the hardest jobs, and she doesn’t know how I do it every day. She was referring to the difficult situations I face daily in regards to short sales, short sale lenders, and getting buyers qualified to buy properties. There are some days, I admit, where I want to just turn off my phone and go sit on the beach, ignore all the problems…but I persist.
In realizing that a solution is only as good as the work put forward to obtain it, I have come to the conclusion that there will always be problems, as in any business. Instead of dreading them, or slacking off, or even throwing in the towel, we need to approach each transgression with not only persistence and a plan, but with the best tool of all: laughter.
How does laughter help, you ask? If you have a stressful day or week, go and watch a funny movie. Aside from exercise, laughter is one of the best ways I know to get through anything. My new pastime is finding and making jokes about lenders, especially those I do not favor (like the ones who Chase off short sale buyers, Chase down bad BPOs, or Chase after foreclosure as a preference). See? I feel better already.
Laughter may not solve your problem, but it will definitely give you renewed energy to go out there and keep fighting. I am ready for a day in the trenches tomorrow (I am hoping to Chase a big problem away), so tonight I plan on watching a funny movie. How do YOU deal with problems?
Monday, October 3rd, 2011
No matter whom you ask – sellers, buyers or agents – the biggest problem with short sales today is still the length of time it takes to get lender approval. It is the number one reason these sales take so long, the reason many end up going to foreclosure, and the main source of frustration for all parties involved in short sales. The magical question is how can we get them approved faster? Well, there are a few ways.
1. Get all documentation to the lender immediately. You may think, “no kidding,” but you would be surprised to know how many short sale sellers do not have important paperwork to lenders before listing their homes. Paperwork can hold up decisions for a long time, especially if it is not completed before an offer is accepted. Your agent should help you in obtaining all the necessary paperwork before you receive an offer – even if your lender will not accept it until that point it is important to have it ready.
2. Try to get lender approval on the short sale price before you list your property. Some banks do this now, like Bank of America. They will actually get all your paperwork and do a complete evaluation of your home, including an appraisal, and tell you what price will be acceptable to them.
3. Work with an experienced short sale agent. Just taking a short sale certification course is NOT enough to make one an expert. Make sure your agent has experience with short sales and is an excellent negotiator (if s/he is an attorney that is a plus), OR that s/he is working with a highly skilled negotiation team. Your agent does not have to do the negotiating herself – many agents work with negotiators, as it is a job that takes many dedicated hours. Find out who the negotiator is and what experience they have.
4. It helps to have contacts. We all know that knowing someone gets you much further in just about any situation than just being another number. Many short sale agents and most short sale negotiators have contacts with various lenders – contacts they can go directly to if there are any problems. I have a few and they have helped me in three short sale situations recently. I know for a fact that none of those would have been accepted so quickly had I not made some calls (and I represented the buyers in all of them). It definitely pays to have contacts in high places (in fact, stay tuned for my next blog, in which I will cover an actual situation with a short sale that you will NOT believe…)
There is no magic button to push to speed up lender approval of short sales, but some lenders are making things easier. Some, unfortunately are not. I have a list of those that are helpful, and when I show one of these properties I feel confident that personally I may be able to help. The same is true when meeting a seller who wants to list a short sale. If you are thinking about short selling your home make sure you understand the process, the skills of the people who represent your sale and are standing behind you, and all consequences involved in a short sale. It is never smart to jump into anything without being well informed.