Yes, there could be hidden problems with your short sale. I’m not trying to scare anyone, although the title is somewhat alarming, but I do feel that sellers need to know what could go wrong with their short sale. I am working on a short sale right now in which the seller has done everything right and we still cannot get an approval. Let me share his story.
My client, hereafter known as “C” for client, contacted his bank, hereafter known as “Citi” for Citimortgage. He called them as soon as he got into financial trouble. His reasons for falling behind are legitimate and due in a large part to the recession as he is in a construction related trade. Everything was done according the Citi’s guidelines. He filled out the workable solutions packet, submitted tax returns, hardship letters and every other document they requested. Then C waited, and while he waited he made payments according to an arrangement with Citi. 60 days after he made his last payment he received a letter in the mail saying that the investor on the loan would not modify the terms of the contract. His response was “Who?”
That’s right, many loans are not owned by the company who performs the service. For example, my loan is serviced by Citi but the investor is Fannie Mae. I guess I’m one of the lucky ones as they are reputed to work with clients in trouble. My clients investor, Hudson City Savings, is a bank that apparently does not care to help the people who have been paying them. So my client, who had never missed a payment and tried to keep his home by working with the bank, was told to shove it by an investor who had no contact with him except copies of his documents. That’s where I came in.
I was called to help sell the home via short sale. For those who don’t know where the term originates, they are called short sales because the home is being sold “short” of what is owed. I looked at everything, did some research both online and with other REALTORS who do short sales and felt good about taking the listing. Citi actually has a good reputation in the short sale world and typically resolves things quickly. I had him sign everything, including authorization, new hardship letter, the works, and waited for a contract. Since I priced it right we had a contract within 2 weeks and I submitted everything to Citi. To their credit, they had everything digitized within 3 days and were speaking to me as soon as they had the authorization letter uploaded. We had the legwork done within 2 weeks and were assigned to a negotiator. That’s when things bogged down.
Our negotiator was not the most responsive. I can’t really say he was the least responsive, as I’ve had worse, but this guy was obviously over his head. In the next 2 months I received a grand total of 1 email response from him, which said “I reviewed your email. I have been sending request to the investor to get a status in writing.” So not only am I in the dark, so is the negotiator. You can imagine how the buyers agent took this news. Needless to say, I am very lucky to have a very professional and experienced REALTOR on the other side of this deal.
During this time, my client also received an offer for a loan modification. Odd that the investor would not consider modifying the loan before, but when it comes to losing money they decided to give it a shot. However, the loan modification actually increased the owner’s monthly payment instead of decreasing it! My client felt more than just ignored. He was insulted. I don’t blame him. What brain trust is sending out modifications that make things worse for the consumer instead of better? The answer: Hudson City Savings, the investor on the loan. Naturally my client turned down the offer to pay a higher mortgage payment.
So I keep sending emails, making phone calls and getting nowhere when I get a very confused and frantic message from my client. The investor had put the account in foreclosure! After sending several emails and calling every number I had for Citi, I finally got the negotiator on the phone. Unfortunately he still had no answers. He told me that this behavior was typical for this investor and that he was elevating the case to his manager. Luckily for us he was able to get a 30 day hold on the account to get it out of foreclosure.
Another two weeks went by and nothing happened. I finally reached someone in the short sale department and found out the reason. Nobody had done anything! Our negotiator had not elevated the file, his manager had no notes on the case and there was no contact with the investor. I raised all kinds of hell and then called my client. He had told me he was considering bankruptcy, and I advised him to consult an attorney on the matter. I know that bankruptcy would at least keep a roof over their heads and prevent foreclosure while we worked on getting the short sale approved. He did file bankruptcy, and now we are in limbo.
So what do you do in this situation? I am writing a letter to one of my senators, Mark Warner, who is on the Committee on Banking, Housing & Urban Affairs. I figure he can take the ball and run with it. This is the type of situation where I see a need for banking reform, and it needs to start at the top. We are still under contract, and the buyers and their agent are in the loop, which helps. I also advise clients to ask who their investor is when they begin the loan modification process, and research them to get an idea of whether or not they are cooperative. Finally, I suggest getting your legislators involved. Even if they can’t resolve it we can at least communicate the challenges of doing business with an industry that is not responsive to their clientele.
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