San Diego Housing Bubble News and Analysis

The Mighty 690.

725

749

deduct 100 from the previous high...695-700

OH! Come on tell us now...Phulezzz?

845. No more overbearing mortgage payment and a 'successfully' paid off mortgage.

I'll say no change or under 50 point hit. It makes sense, shorts cuase less financial damage to the lender than jingle mail or freeloading for 6 months to a year. The back taxes, the back hoa fees, all of that is usually avoided with a short. I personally think banks could have done so much to help themselves if they had not been so against shorts a year ago, they were worthless a year ago, you could never get an answer, on one I never did get an answer. I am biased having made three short offers last year, all rejected and later repo'd, all ended up selling for less than my offer and all stopped getting mortgage checks from the occupant. If they did the math math, the lost twice the money dragging their feet. The only thing to motivate the borrower on a short is credit salvaging, I bet we hear more stories like this going forward, because if there is no difference in the credit hit, they will just stop getting payments from those people.

I keep reading about how short sales are impossible to close as well. To me, there is still a heck of alot of variability in them. It "appears" to me that by far, Wells Fargo is the most motivated lender with regards to approval and processing them. It falls off quickly after that. I have a short sale that will close next week and approval for the short sale was obtained in a matter of about 3 weeks after the offer was submitted. Conversely I have a few other short sales where the buyers have been waiting for months with no response.

Ok, I'm pretty well versed in this stuff and this is the first time I ever heard the theory that short sales only benefit the listing agent.

There is a million variables here. The borrowers either had just one lien or it was a purchase money loan. Also, from the sounds of it, I would bet this is a portfolio loan and not securitized.

The reason why 1 lien OR purchase money matters is because then the loans are effectively non-recourse. If it 1 lien refi then the borrowers are covered by the single action rule. If it is purchase money then it is non-recourse automatically.

Portfolio versus Securitized matters because servicers for securitized loans have a much tighter range of options available to them defined by their PSA's (which can each be different depending on the pool). A portfolio loan the bank owns and just looking at if the borrower is recourse or not brings the situation to a logical conclusion pretty quickly if it isn't recourse. There really is no option and its in the banks best interested to get it sold as quickly as possible.

SD R,
Actually Wells fargo is about middle of the pack in terms of motivation. They tend to be the most tedious and rigid in their processing but provide good releases.

I have gotten approvals in under a week from some lenders.

And then there is CW. If you kow what you are doing and doubt foul it up, its possible to do in 60 days. But they constantly change their policies and the releases they provide. It seems as though BofA has gotten tougher with te releases of late.

Effective Demand,
If you look around more than a couple minutes online you will see alot of peple claiming the damage to ones credit is just as bad with a short sale.

All your comments about the recourse/non-recourse, securitized/non-securitized are accurate. However, when you do a short sale you can give up the non-recourse nature of the loans which does not specifically cover a short sale but rather a foreclosure. All the issues regarding portfolio/securitization only cover how quickly the short sale gets done.

The question I was never quite able to put a figure on is what happens to one's credit when a large debt is written off and I fully expected 100 to 200 points of FICO damage, maybe more.

I have a client whose scores dropped almost 150 points because a department store bill for about $75 went to an old address for 3 months (dropping from 815 to 670 recently). This is probably gonna make some folks unhappy around here who have never gotten debt relief anywhere near this level. Quite frankly, I am shocked myself. Their scores today (they sent me a printout) are 748, 748, 770. Those are damn good scores and still prime A+ quality borrowers.

Wells Equity or Wells Mortgage?

They are both okay on my ss listings but Equity seems a lot faster.

Just sayin.

So what were their scores prior to the short?

Scores were high 700's/low 800's.

If you are a skilled negotiator then you can negotiate HOW the "SHORT SALE" is reported with the three bureaus by the lender.

Most Realtors don't know this as they specialize more in listing the house on the MLS and letting people know when potential buyers are going to show up, not negotiating or understanding all the variables that one can use as leverage with a bank.

If one is not late, then obviously, their scores are not going to take that big of a drop. The question is HOW IS IT REPORTED and how will THAT REPORTING affect future purchases of THINGS. This is often overlooked.

Every case is different and every bank is different in regards to short sales, mods, etc.

This is what is happening now so those of you who are late on your seconds may want to pay attention. Banks (Wells Fargo) that have pools of equity lines are taking portions of them based upon delinquency and writing them off, similar to a CC charge off, before they foreclose or SS and selling the debts to collectors.

This means that you will have collectors hounding you for the rest of your life and possibly bring a judgment against you and goes as far as wage garnishment for the collection.

If anyone is doing a mod or short sale make sure you have someone do it that KNOWS ALL THE ELEMENTS and READ what you sign in detail.

I know a lady that is contracted to do all the processing and negotiating for alot of attorneys clients on these and has been doing it for years. She currently has over 200 files....

If anyone has questions about this arena and the latest, she will dispel all the myths and give you the realities in a heart beat or I can ask her and post on it....

Nothing should be done rashly right now when it comes to short sale negotiations and mods. You have to know what you are doing.

Urban the two I have had with Wells were Wells Fargo Mortgage.

sdr I I have not had any luck with CW but that has been strictly as a selling agent. It has been rather nightmarish. In those cases it seems more like the listing agent has thrown in the towel then anything else.

I have had a few offers in for short sales to Battiata and the results have been abysmal, more likely because of his office then the lender but that is speculative.

Another thing that nobody has touched on at all has been the tax liability issues. FLU posted on this awhile ago and I responded by discussing the Debt Forgiveness act. However when one really scrutinizes the Debt Forgiveness Act there is not nearly as much protection as you think there is.

There is no black and white in all of this. MM touches on some great points but it is not always possible to negotiate how something is reported. Many of the lenders have boiler plate approval letters they will not change.

I have closed several with CW. Its a matter of not messing up the process and peristence/patience.

Still, I am stunnedat how little impact the short sale had on their credit. They are good responsible people and would have done more to offset the loss if I hadnt negotiated it away. I am thrilled for them as they are one of the rare short sale clients I have that truly deserved a break.

I think my "50 point hit" guess is the winner, I'm going to crown my a$$, Denny Green style.

If you utilize an attorney's letterhead and backing with a forensic audit of the file amongst a few other tricks it will go a long way and give you more leverage. Having a few high level connects at these places also helps.

sd, the approval letters are mostly boiler plate with banks these days you are correct, BUT how you request and negotiate HOW THEY REPORT IT to the bureaus is not...big difference....most people are not aware of this and do not negotiate it....

Obviously, the closer you are to the trustee sale the more leverage you have as they know they are about to own the property and take a bigger hit on the books...

By the way, if anyone has a WAMU NEG AM loan, they can be negotiated to a 1%/3%/5% 40 year term even if you are not late.....CHASE wants to clean these up right now.....and strengthen the portfolio by getting rid of these at all costs...it is called a step loan....

TG
I would have guessed about 680.

You were the winner along with BG.

But you are not who you think you are!!!!!!!!

sdr

MacroManic: I'm not sure what you are saying? How can a second sell a non-recourse loan to some collector who can then try to hunt you down for years? They can't just change the terms of the loan to where they can garish wages etc, right? A purchase money second only has right to the secured asset, nothing else as I understand it by CA law.

If their scores are still in the 700s and they are prime A+ borrowers after they did not honor their original contract then there is something wrong with the credit reporting system. In my book these guys are poor credit risks and their credit scores need to reflect that.

92126
That wont stop some of them from trying

sdr

MM and all, I know an older lady that is trying to do a loan modification, but not having much luck and I don't think is going the right direction. She has some people even asking for some money up front to 'help' her with this. I have told her I think this is the new fraud of the day...so hopefully she listens. However any guidance from some of the Piggs on this would be helpful.

What I know about her case:
Bought 2 condos in the hey day. Pulled out tons of equity in Condo #1 to purchase Condo #2. Had originally put down over $100k to purchase Condo#1. Condo #1 is now worth #200k less than what total loans amount to....one loan with Wells, the other with Wachovia, which now is Wells.

Any ideas Piggs. She's retirement age and I just hope she can get to the right help for her situation. Doesn't want to lose Condo #1. She has been told that she has to stop payments to even get the bank to look at a Loan Modification, so I believe she is a couple months behind right now. I think she's getting bad advice....what do you all think? any ideas I can pass on?

92126,

These seconds are not Purchase Money Seconds they are drawn post purchase.

It is of vital importance, either way, that you pay very close attention to what you sign and make sure it is a CANCELLATION OF DEBT. Kind of like how you should have paid very close attention to the loan in the first place.....imagine that....

My short sale finally closed after 10 months (Arril to January). I don't know if time was on my side because I started the offer with $650k and end up closing the deal at $477K with no cost out of pocket for escrow or loan. I think it was a hassle and at one time my wife and I had changed our mind but the kids schooling forced us to stay local.

MM: Thanks I missed the "equity lines" description, my wells 2nd is purchase money and they recently sold it to a collection agency anyway, so your comment peaked my interest obviously. I'm relying on chap 7 to get a fresh start so I'm not too worried about it.

92126,

So they sold your purchase money second to a collection agency? Did you sign a cancellation of debt on the second when they approved the SS?

The sad thing is people think they are out of the woods on these deals but the banks, as we know, will calculate every way possible to make money.

Even more of a reason to try to get someone experienced to review these documents.

macromaniac,

Do you think the OP's short sellers still have a high credit score because their $100K in debt wasn't cancelled, it was just sold to someone else?

92126 I had a former client who did the same thing with his La Costa home. The action did indeed stop the trustee sale and the BK went through. The court ordered sale is underway.