The uncontrovertible truth that servicers make more money from a foreclosure than mortgage modification or short sale was finally noticed by my home-town newspaper. A reporter attended the Mesa County foreclosure auction and was struck by the outrageous prices bid by lenders, and that almost none of them sell to investors at those auctions.
24 of the 361 foreclosed homes brought to auction in Mesa County in 2009 sold at auction, according to the Mesa County Public Trustee’s Office. In 2008, 111 Mesa County homes made it to auction.
The Home Affordable Foreclosure Assistance Act that took effect on April 4, 2010 has proven to be an even bigger debacle than HAMP. No one is happy with it. It was written by the banks. Go figure.
Every servicer and portfolio lender has a proprietary calculation called Net Present Value that tells them what selling price they might expect at Public Trustee’s Auction. The lender or sevicer will never reveal that calculation, nor how it was calculated. It is always based on outstamding loan balance. Rarely, the lender will allow for a ‘deficiency’ or an amount less than the loan balance, probably because they know the condition of the property suffers. The bid often is created by adding the outstanding balance on the home, interest on back payments, and attorney and public trustee fees for the lender. Much of the time, because of the mortgage crisis that the banks helped create, there is little difference between loan balance and NPV. That leaves no equity, or value to any investor.
In almost every case, there is no rational reason for a property to go to auction. The single explanation is that the mortgage servicer makes money on a foreclosure and avoided all good faith efforts that the distressed homeowner may have made to resolve the mortgage trouble.
Then there’s the often cited instances where the lender illegally foreclosed even while the distressed homeowner was engaged in mortgage modification or short sale negotiations. No lender has been prosecuted for this, probably because of the very powerful banking lobby in Washington, DC.
If a property does not sell at auction, (obviously most of the time) it goes back to the lender. These are referred to as REO’s or Real Estate Owned. A Real Estate agent specializing in REO’s is assigned to get as much as they can for that property. The mortgage investor takes the loss. No harm to the servicer, they already made their money.
Here’s the biggest reason to not buy at public auction: Investors are not technically allowed to inspect property in the foreclosure process. In a short sale transaction, the investor is allowed and encouraged to inspect the property. At REO sale the investor is given at least ten days to inspect the property. Why would anyone buy something they can’t evaluate? Especially during severe weather where one can easily assume the vacant properties have not been weatherized? Can you imagine how abused a property must be to not sell for $32,590?
Typically small, local banks and credit unions are more cooperative in avoiding foreclosure by mortgage modification or short sale.
For those readers that prefer YouTube videos, try this: How to Get A Beneficial Mortgage Modification Now
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tags: do it yourself short sale, rest report, avoid foreclosure, stop foreclosure, prevent foreclosure, foreclosure alternatives, self negotiated short sale, negotiate short sale, investor negotiated short sale, discharge mortgage deficiency, homeowner negotiated short sale, hafa, home affordable foreclosure assistance,grand junction, colorado
Originally posted 2009-12-31 22:37:56. Republished by Blog Post Promoter
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New blog post for Mortgage Mod Monster: My local newspaper reports on the treachery of the mortgage servicers http://bit.ly/hT9n8v
………….Short Sale Foreclosure……………………… . .FORECLOSURES .Also known as REOs Real Estate Owned – by the bank . .When a lending institution forecloses on a property – that is takes ownership of it back from the borrower – it will first send it to a trustee sale public auction. Surprisingly only a small percentage of those properties are actually sold at auction – particularly in Mesa County. Thats because the banks tend to establish the minimum auction price at the loan amount. Not too many buyers at that level because usually the home is worth less than the loan amount. Once it clears auction the property will come back to the MLS as a more-or-less normal listing. Certainly more normal than a short-sale. .The difference between an REO and a conventional sale is that in addition to the standard statewide real estate contract the lending institution will send along an addendum to the sales contract. Ive seen them range from 5 to 18 pages long. The addenda tend to take away rights that the buyer would have according to the standard contract. For starters the buyer will need to sign an As Is adddendum. When the home inspection reports various parts of the house in need of repair the bank insists that it will not make any. The buyers options are to either take responsibility for the repairs or just cancel the contract..The bank also often reserves the right to cancel the contract at any point before Close of Escrow and take another offer..SHORT-SALES.A short-sale is a pre-foreclosure situation in which the lender agrees to accept a price loan pay-off that is below the current loan amount – essentially to keep it from going to foreclosure.