Oh, if only the problems of the world could be solved with the writing of a single blog. But we all know better; most problems are easy to identify but tough to solve. Short sales in the Southern Oregon Real estate market are no different, and despite my own self-imposed skepticism, I will point out some obvious problems with the short sale process and suggest a simple way to streamline the procedure.

A short sale occurs when a homeowner attempts to sell his home for a price that is less than what is owed on the mortgage. It is incumbent upon the seller to inform the bank of the their intentions to sell for a reduced price, but simply informing the bank is no guarantee of lender cooperation. Often the short sale is additionally complicated by 2nd and 3rd mortgages that are attached to the deed and must be removed before the deed can be transferred to another owner. Nevertheless, the mortgage holder in the first position has all the power because they are the first to be paid, and may be the only note holder to be paid. Problems with short sales occur when the mortgage on the home has been sold on the secondary market and is now actually held by a different bank. Often banks find themselves in a position of merely servicing the loans on behalf of the real bank owner and this is where problems escalate.

For example, suppose a property was originally mortgaged by Countrywide. When Countrywide failed, its loans were bought by Bank Of America. But Countrywide sold many of its loans to the secondary market, most notably Fannie Mae. Now the responsibility for servicing the loans originated by Countrywide and sold to Fannie Mae falls to, you guessed it, Bank of America. But the motivation for Bank of America to actually perform is minimal because for them there is no monetary gain. Plain and simple, in this often played-out scenario, Bank of America has become an administrator of paperwork with no vested interest. As a result, they frequently allow multiple offers to be submitted to their centrally located calling centers, but cease to respond to these offers for months upon months. Eventually, legitimate Buyers withdraw their offers and force the owner into foreclosure.

So why don’t banks respond to offers? If a bank is a merely servicing a loan for another entity like Fannie Mae who actually holds the mortgage, doesn’t the loan servicing bank have a fiduciary duty to respond in a timely manner?

Unfortunately, no. As a servicing agent, banks have no fiduciary responsibility to either the seller who took out the original loan with another bank, or with the bank that bought the loan on the secondary market. The servicing bank is required to manage paperwork, but is under no obligation to facilitate the short sale process in a manner that actually assists the individual. Servicing banks merely forward paperwork to call centers that are centralized at a distant location. And if you’re in the Southern Oregon real estate market trying to get your short sale approved, you may well find yourself swimming against the current. If a bank doesn’t actually own the loan, they have no motivation to respond.

But there is a simple solution to this complex problem. Decentralize. Eliminate the distant location calling centers as the destination for offers and instead forward them to a local bank representative schooled in local property values. The local bank representative can promptly respond to all reasonable offers, call for an appraisal of the property, and move forward with the offer in a timely fashion. Isn’t this how real estate is supposed to work? I should say so.

Michael Masters

A Socially Conscious Real Estate Consultant

     

More on Topics: Bank of America, Estate, Foreclosures, Market, Oregon, Real, Real Estate, Sale, Short, Short Sale, Southern, Southern Oregon, Southern Oregon Real Estate

Tags: Bank of America, Estate, Foreclosures, Market, Oregon, Real, Real Estate, Sale, Short, Short Sale, Southern, Southern Oregon, Southern Oregon Real Estate

This entry was posted on Monday, November 9th, 2009 at 11:25 am and is filed under the category Grants Pass Real Estate, Green Real Estate, Michael Masters, Real Estate, Southern Oregon Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.