I was speaking to a real estate agent from another state and he was venting about his experience dealing with a short sale. After 6 months in escrow and next to action from the lender he is told that the loss mitigation guy who was working the file had 3800 files to work. Let me say that again 3800 files!
I am not a rocket scientist, but logic tells me that if you truly want to move these properties you would bring in some warm bodies to work these files. There is no shortage of out of work loan officers and real estate agents who are more than qualified to process paperwork. The time they are sitting on the market is losing value at a greatly higher rate than it would cost to hire a few more employees.
So what could be their motivation for so little action?
- Could it be that they are delaying showing the losses on their books?
- Would their bonuses be directly impacted by that?
- Are they trying to withhold the full truth from their stock holders?
- Are they trying to break the housing market even more to get more of the bailout money?
- Are they just that incompetent?
No matter how you explain what the big banks are doing, their lack of action is causing the problem to get worse. The amount of time these homes sit and rot on the market is causing everyone else's homes to drop in value around them. They are making the purchase of one of these short sale, pre foreclosure or REO homes so painful that most buyers and real estate agents try to avoid them.
They are causing so much harm to others and entire communities by their actions or lack of actions; it may only be a matter of time before some legal types see a way to make a buck and go after them.
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Randy L. Prothero, REALTOR®, ABR, AHWD, CRS, e-PRO, GRI, SFR
Century 21 Liberty Homes
Randy Prothero is well established as an expert in working with military / VA clients and first time home buyers. His home seller's (listing) campaign is one of the most aggressive marketing programs in the area.
Based out of Mililani, Hawaii. Randy services the island of Oahu (Honolulu County) and the Leeward Regional Chairman of the Honolulu Board of Realtors. To improve overall professionalism in his area Randy also offers classes for real estate agents.
www.HawaiiRandy.com * Oahu (Honolulu County) Property Search * Hawaii Military Relocations
Wow- I didn't realize that the banks are dealign with those kind of numbers! Yikes- they DO need more bodies in there working on those files to speed things up. You are exactly right, the longer those files sit, the worse this situation is going to get.
This should be the questions we should be bringing to Washington- not another bailout for the automakers!!
Thanks for sharing, Nicole Weidauer
The Egerer & Weidauer Team, Keller Williams Realty North Seattle
Nicole - I agree those in Washington need to be asking questions about this from the banks.
The longer they delay the more they are loosing. Take the deal and run well there is a deal. Come on banks.
I agree Randy. The lenders that are not hiring extra bodies are making things a lot worse but some lenders do have it together.
Randy...it is also keeping the availablility of homes artificialy High!
Agreed, love to see the banks speed up the process some how.
I was talking to a bank chair the other day and he mentioned that some of the stalling (in his opinion) is due to not wanting to devalue the book value of their assets. The more the value of the REO declines the most cash they need on hand. If they were to clear their books of their REO inventory it would wipe a good many of them out.
Jubal - I understand they have challenges, but there is no excuse for not hiring people to service these files.
Mike - Our local banks are not having the problem. Then again they did not write the bad loans the way the national ones did.
William - That is a real problem, if you are trying to sell your home.
Brett - They are showing no sign of wanting to do anything about it.
Jesse - On the other side the short sales and pre-foreclosures are being forced to foreclosure by the stalling. They will have a lot more REOs as a result and the value of their assets is dropping even more by the lack of action.
The other thing that is happening, by what they are doing they are forcing even more homes into that situation and multiplying their losses and the public's losses.
Randy, It's sinful how much money banks are flushing down the drain by not expediting short sales more efficiently. It's my opinion that this is one area where the "bail out " money needs to be spent. The tax payers could save billions in bail out money just by having short sales regulated. It is getting better but we have a long ways to go.
I have tried to figure out whether it's because the banks are undermanned, or they have untrained personnel. Perhaps they are simply overwhelmed by the sheer numbers of property on their books.
Quite honestly, the volume of homes in trouble ,and in REO or short sale territory, has created an avalanche that I think is simply difficult to manage. It almost seems like a financial Katrina, where the "rescuers" flew over head for days, trying to figure out what to do to triage the catastrophe. There seems to be little protocols, or adequate procedure and guidelines to deal with them expeditiously.
It is likely an all of the above scenario. ACT 137 isn't really helping matters in Hawaii either.
Gotta believe they are stringing things out...until the free money comes!
Randy, all good questions. For what ever their reason is, they are making it very frustrating on everyone else.
I have been wondering about these same questions. There has to be a reason why the banks are not getting more people in to move these files along more quickly, and delaying the loss on the books makes sense.
My other gripe is how long banks take to respond to offers on foreclosure. I have one right now that is two days past binding acceptance, but the listing agent keeps telling us to hold on, hold on, should have response tomorrow. This happens with almost every foreclosure offer I have done lately, and it is not right.
Randy, I don't understand why these are called short sales. Every one that I have done has ended up being a long sale.
B.B. - I think that the politicians could earn their pay if they force the banks to take action.
Myrl - I think they have had enough time to develop a plan. They have chosen to not fix it.
Pete - Act 137 is another blog or a series of blogs all by itself. That is a perfect example of what happens when you elect too many lawyers.
Gary W. - It would explain their lack of action.
George - Besides frustrating they are injuring many people in the communities where they have this dead inventory.
Brenda - I have an offer on an REO that they verbally accepted more than two months ago and we still have not opened escrow. I will not mention names but their initials are CW.
Marchel - I think our industry should take you suggestion and start calling them long sales.
Randy
Great Blog in Florida I'm dealing with the same problems...the banks are overloading these workers and thus causing great delays and even worse scaring offe ready and willing buyers...
Tim - They are definitely making this problem much worse than it needs to be.
Randy... I think every point and reason that you gave is right on... even down to the arrogance level... and being incompetent. Very sad indeed.... good insight here. This needs to be mentioned in the media more often and look at by congress more often. To me, it seems like the gov't needs to stronghold the investors just like a bookie would stronghold someone that owes them money.
Jeff - I agree that the media needs to cover this side of the story a lot more.
We're lucky we are not one of the states that is really hard hit. They have no excuse for being so bad at what they do. As you say, there are plenty of industry types out of work that could help.
Georgina - There is really no reasonable excuse.
Randy - this is a good post and your frustration is registered. In the defense of lenders I will say I have spoken to my counterparts (Directors of Operations and VP of Operations) from all across the nation and we have conversed about this. Ramping up really would not fix the problem quickly and in fact could make it a much worse situation than it is. Part of the problem is so many inexperienced investors and agents submitting short sales packages that are either ridiculously low offers or incomplete/incorrect packages. Contrary to popular opinion warm bodies will not "cut the mustard" and it would take too long for most out of work loan officers to get up to speed and in the meanwhile they would bog down the system even more. Yes, it is a HUGE problem and it would be wonderful if that solution would work. Even though anyone can become a "Certified Loss Mitigation Specialist" for only $2995 they wouldn't have the first idea how to really be a loss mitigation assistant. So let's encourage people making offers to know what they are doing and make offers that aren't so ridiculously low they will only waste time for realistic offers like I am sure most AR members make.
I have to agree with Jesse. Banks do not want to book these losses, especially when many are critically low on capital already. Look to the banking crisis in Japan during the 90's for a lesson on how long these things can take to work out. That took only, oh, about 15 years.
Ken - In one case the bank had 3800 files on one persons desk. There is no way on earth that anything will move with that situation. The problem will continue to get worse.
The ability to submit the packet properly is a problem. The lenders do not have people available to assist agents and seller's better learn and navigate through the process.
Brian - I am sure that is a big part of the problem. Unfortunately by the way they are currently handling the situation they are digging the whole even deeper and it will take even longer to recover.
Banks are overwhelmed. Never did they prepare to be real estate investors. or to have loss mitigation departments. It is going to take some time for the banks to learn and staff people to handle all of this
James - They have had at least 2 years. How much time do they need? We will be in the next cycle and they will be behind on that one too.
Did you send an email link to this blog entry to all the banks out there? LOL
Russel - They don't answer their messages now. It would be a waste of time sending it.