That’s a very real statement.  According to banking experts we’re going to hear it more in the near future.  Scary Times!

But what happens if your bank does fail?  What does that mean for you?  What does it mean for your mortgage?  What if you are in the middle of a Short Sale?

First of all, when a Bank does fail the F.D.I.C swoops in and takes over.  They don’t even ask.  They show up on Friday at 5:10 PM in hopes of opening up again on Monday as a new Federal Bank.

The Fed’s first job is to find out exactly what the bank has in assets and liabilities.  Job # 2 is to make sure that those who have insured deposits have access to those should they wish to draw that money.  The third is to start liquidating the banks assets to cover the bills.

When Indymac Bank failed in early July it gave many of us first hand experience on what happens and how.  They were closed on Friday, opened on Monday and started handing out money to the insured depositors. 

For those that have a Mortgage with the bank, there is no change in your note and terms.   You still get to make those monthly payments.  Sorry.

For those that had Uninsured Deposits in the bank - You may get up to 50% of your money back.  Really!  It may take a bit but the feds are working on it.

That may be good news for those that are working on a Short Sale with the bank.  Why?  Because the Feds are actively looking for anything that can convert to quick cash. 

Case in point.  We had a buyer looking at an Indymac REO (bank owned property).  They made the offer and were told by the bank "We’ll get back to you and let you know within 45 to 60 days". 

The offer was made right before the bank went under.  Suddenly they get a call from their Agent, "The bank has accepted your offer IF you can close in 11 days!" 

This wasn’t 45 days it wasn’t 60 days, it was closer to 14.  The dust hasn’t settled on the bank failure but the Feds have lit a fire under certain files hoping to yield quick cash.  They (the Feds) want their money back.

So if you have a short sale in progress - your banks failure may be a very good thing. 

Is your bank set to fail?  That’s a hard one to say.  One of the keys is the amount of Non-Performing Assets it holds on it’s books.  What’s a NPA?  The biggest pile might be the mortgages it holds that borrowers are no longer paying on.  You might hear words like Subprime, Interest Only and Option ARM. 

I’ll explain more about the NPA in the next post.  In the meantime you can read all about how they hide those assets on their books:

"Level 3, FASB 157, and My 10 Taxi’s"

*  All images courtesy of The Fail Blog one of the funniest sites on the planet!

As of yesterday it was on the desk of the negotiator.

Today he no longer has the file and we tracked it down to Nora.  We had to track down her phone number too.

One problem.  Nora isn’t there.

She was kind enough to let us know she was out by recording her daily outgoing message.  Thanks Nora!

Too bad she’s never cleared her incoming messages.

Her box is full.  Bad Nora!

I just read a very sad story in the San Francisco Chronicle.

Want a synopsis?  I can boil it all down to this.

• Elderly couple in their 80’s
• Owned the home for 54 years. 
• Got caught up in the refi frenzy. 
• Doesn’t know where the money went.
• Given three days to vacate.

What was missing in the story is the part about the "trusted" mortgage advisor.  For every loan, every refinance, there was a mortgage person who should have, could have, but didn’t, hold up a hand and say STOP!

Why?

Because that mortgage advisor was charging and making huge income.

There is no mandate, no law, no regulation prohibiting trusted mortgage advisors to always do the responsibly right thing.   Yes there is something called Predatory Lending.  Yes they can come up with statewide licensing and disclosures.  But the real change, the real difference, has to come from the heart of the loan officer themselves and that’s not something anyone can regulate.

Yeah, it’s a sensational headline that’ll get washed away with all the other stuff happening.  Here’s the thing.

In the State of CA, until there is a Trustee Sale, the homeowner has the rights to the property.  After the foreclosure process, then and only then can a bank order the locks changed. 

WAMU made a mistake this morning and had the locks changed on a property we’re working on a short sale for.  The owner, a single mother of three small kids, came home to find out the locks were changed. 

WAMU’s response when I called telling them they made a mistake?  "We’ll mail her the keys…"

Not good enough.  I forced the issue and now they are trying to put the locksmith in touch with the Listing Agent.  Meanwhile, the homeowner is sitting somewhere in a lawyers office.

Honestly, this stuff drains the life out of me.

Hey, Miss Loss Mitigation Operator…

I’m really not as dense as you might think I am. 

I did however, play dumb just because of your less than helpful attitude. 

Matter of fact, I made a graph just for you!  Maybe this will help you understand.

The next time we talk, and I politely ask questions about the documents you had before but somehow lost, please refer to the above graph and chose your response carefully.

That’s save both of us plenty of time. 

We’ll talk again tomorrow - ok?

Good luck.

Houston, I think we have a problem…

Really easy.
You call, you talk to the Lender, they accept the deal and you move on to the next one.  Done!

Some people wonder why I start calling at 5 AM Pacific time.
Some people wonder why I have 26 different phone lines on my desk.
Some people wonder why I’m always on the phone.

I don’t.

Film at 11:00…

Thought I would just share this.

I’ve got two perfectly good short sale negotiations that have been shot down by your Mortgage Insurance Company and I’m not happy!

I’m not talking about Mortgage Insurance that the Homeowner had.  No.  That would be too easy.  I’m talking about a dark, sinister, evil form of MI that is killing perfectly good short sales everywhere.

Once the loan was put into place, some (not all) Lenders bought a policy with you (which they paid for) on either the individual loans or an entire pool of loans.  Maybe you insured a tranched portion of those pools.  It doesn’t matter.

The Homeowner doesn’t know about this policy.  Nobody knows.  Ok, you do and the Lender at some level does.

And in the case of a short sale, the Listing Agent, the Buyers Agent, the Buyer, and all the parties concerned don’t know about this.

Until what we thought was the "Decision Maker" at the Lender submits the deal to their boss for final approval we don’t get to find out about the presence of MI or your involvement. 

So the Lender’s Negotiator sent the approved deal to you.  It was a good deal.  It was inline with the comps.  It was a good offer considering.  But then you come back to me saying that you are requiring a Promissory Note of $XXX,XXX ?

Did you not read the comps?  Did you not see the hardship?  They don’t have a job!  No Income!  They’ve drained their savings to make the payments.

Thanks for taking my call.  I weaseled your number out of the Lender.  I think they might have been a little tired of talking to me.  You were pleasant enough.  I understand your position.  If the home goes to Trustee Auction, your company is set to pay to the lender $xx,xxx.  In approving a short sale you are setting your company up for the same loss - ONLY if the Homeowner signs the Promissory Note.  I get that too.

My problem isn’t in the business decision to insure the loan.  that’s business.  My problem isn’t that you wasted a lot of people’s time, I can blame the Lender for that.

My problem is that there is no room is this business model for humanity, empathy, or compassion.  Your calculator shows either black or white - period.  The only loss you are concerned with is the loss your company will have in paying the claim.  If the home becomes an REO - you don’t care.

You are forcing two perfectly good short sale transactions this week into foreclosure.  Two perfectly good deals.  Two family’s who tried to sell, tried to refinance, tried to modify, and then finally tried to short sale, all in good faith.  And to you, their efforts mean nothing.

Shame on you!

When the Lender files the Notice of Default to start the foreclosure process often times they will also assign a New Trustee.

When that happens you’ll receive all sorts of important registered letters announcing the New Trustee. By law they have make sure you are properly notified. (you might call it being Spammed).

This is normal. Why do they do this?

Maybe the New Trustee is better, faster and / or cheaper than the old one when it comes to the Foreclosure Process. That’s all.

The Good News is that the New Trustee cannot change the terms of the Note. They only act as instructed.

The Bad News is that you still have a Notice of Default and it’s been transferred to a company that might better process that.