Home › Forums › Financial Markets/Economics › OT: “Act Now: Get $30000 cash back from Bank of America if you short sale before…”
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May 18, 2012 at 9:44 AM #19798May 18, 2012 at 10:05 AM #744072CoronitaParticipant
God, need to go buy more rentals so I can get my cut…Give me that $30k check in rent….
Ironic since it would be nice if they just gave me the $30k check and lowered my purchase price of something by that amount.
I know I know… Life isn’t fair…Deal with it….
May 18, 2012 at 10:05 AM #744074AnonymousGuestflu,
Here are some tips that can help you calm down and may also help with your trading decisions if you apply them correctly:
Understand the meaning of a sunk cost. Learn to identify them.
One of the most common mistakes in the realm of decision making is the failure to recognize sunk costs and the failure to apply this principle: sunk costs should always be ignored.
Once you understand the sunk costs found in the situation you describe in this thread, you will see that it is likely a wise move on the part of the bank. It is likely a “win win” (another concept that many fail to fully appreciate.)
Another similar example: Many landlords know that the best way to get rid of a deadbeat tenant is to pay them to move. That’s right, solve the problem by giving money to the guy who owes you money. Sounds nuts? Think about it.
Step back from the moral outrage, and think objectively.
May 18, 2012 at 10:10 AM #744075CoronitaParticipant[quote=harvey]flu,
Here are some tips that can help you calm down and may also help with your trading decisions if you apply them correctly:
Understand the meaning of a sunk cost. Learn to identify them.
One of the most common mistakes in the realm of decision making is the failure to recognize sunk costs and the failure to apply this principle: sunk costs should always be ignored.
Once you understand the sunk costs found in the situation you describe in this thread, you will see that it is likely a wise move on the part of the bank. It is likely a “win win” (another concept that many fail to fully appreciate.)
Another similar example: Many landlords know that the best way to get rid of a deadbeat tenant is to pay them to move. That’s right, solve the problem by giving money to the guy who owes you money. Sounds nuts? Think about it.
Step back from the moral outrage, and think objectively.[/quote]
of course i understand the concept of sunk cost…Personally, I’d rather the banks to just FC on the property.
You know what? That’s why I want to buy more rentals… I want that check money back, and I want to get my cut… At least when i do it, it’s legitimate.
May 18, 2012 at 10:33 AM #744079briansd1GuestGood post, harvey. I like how you think.
The problem with ignoring sunk costs is that people have emotional investments at stake. There’s also the issue of loss avoidance whereby resolving a situation locks in the losses forever.
My prediction is that, one day, we will decide that Afghanistan is a lost cause and we walk away. Meanwhile, people’s pride and reputations are at stake so they’ll likely prolong the pain for all of us. Lose-lose.
With the BofA short sale deal, people feel it’s unfair that homeowners who put little money down could do a short-sale and get out from under.
Those who had made large down-payments and got fixed-rate mortgages at the peak are pretty much stuck in a bad situation. They can’t refinance or walk-away without losing a lot.
But overall, I think that the BofA deal is win-win for the bank and homeowners who are underwater. Up to $30,000 is reasonable compared to the cost to foreclose, manage, maintain and resell the properties.
May 18, 2012 at 10:42 AM #744080CoronitaParticipant.you know brian and harvey..There use to be a point in life when a person would avoid foreclosure because there were so many things stacked against them if they did, that they would voluntarily exhaust everything else without a need for motivation….
think about that one…
[quote]
Those who had made large down-payments and got fixed-rate mortgages at the peak are pretty much stuck in a bad situation. They can’t refinance or walk-away without losing a lot.
[/quote]I feel bad more so for people who are still renting and holding out…Because at least folks that made large down payments and got fixed rate mortgages still went through this with a nice low rate and probably ended up with a lower payment that renting by now…
Some (not all) that have been sitting out for a really really long time really, up to now, really got screwed…
May 18, 2012 at 10:52 AM #744082briansd1Guest[quote=flu]
think about that one…
[quote]
Those who had made large down-payments and got fixed-rate mortgages at the peak are pretty much stuck in a bad situation. They can’t refinance or walk-away without losing a lot.
[/quote][/quote]
I know a guy who bought his condo for about $500,000 at the peak. It’s now worth under $300,000. He doesn’t have the equity to refinance. And because he got a fixed rate mortgage, he’s not enjoying the low rates of today. Rent on a comparable place is much lower than carrying costs.
Can’t do a short sale because, on his income, he can afford the mortgage payments. Remember that sellers must submit short-sale packages and justify the short-sales.
He put more about 30% down… I’d say ignore the sunk costs, buy another place, and walk-away from the old one.
In business, you have to step back from the moral outrage and think objectively.
May 18, 2012 at 10:56 AM #744083CoronitaParticipant[quote=briansd1]
I know a guy who bought his condo for about $500,000 at the peak. It’s now worth under $300,000. He doesn’t have the equity to refinance. And because he got a fixed rate mortgage, he’s not enjoying the low rates of today. Rent on a comparable place is much lower than carrying costs.
Can’t do a short sale because, on his income, he can afford the mortgage payments. Remember that sellers must submit short-sale packages and justify the short-sales.
He put more about 30% down… I’d say ignore the sunk costs, buy another place, and walk-away from the old one.
In business, you have to step back from the moral outrage and think objectively.[/quote]
You said it yourself… He can afford the payments…He shouldn’t be able to do a short sales…For him it’s FC or exit…Why should he be getting an incentive to do a short sale.. Too damn bad…
May 18, 2012 at 10:56 AM #744084CoronitaParticipant[quote=briansd1]In business, you have to step back from the moral outrage and think objectively.[/quote]
Sure i guess folks in china say the same thing before harvesting a prisoner’s organ.
May 18, 2012 at 11:15 AM #744085bearishgurlParticipantMy understanding from this program is that the borrower needed to be in default by 1/31/12. This provision is to prevent BAC borrowers from now deciding to strategically default in order to qualify for the cash payout upon a successful SS. The borrower has to follow their SS agreement to the letter. This likely means, deliver the property VACANT and broom-swept CLEAN. Do NOT STRIP fixtures appurtenant to the property or that you specifically agreed to convey to the buyers. GO TO THE DUMP to rid the property of your debris/junk before buyer’s final walk-thru. Remove your pets, any progeny they had and all their waste from the property. Remove your non-running vehicles, boats/trailers and non-running appliances from the property and the street. Evict or otherwise remove your “tenants” and all their junk before buyer’s final walk-thru and replace anything they took off with. Do not do anything to jeopardize the timely closing of your SS (incl filing for BK). If you are divorcing, get your spouse’s timely signature on ALL DOCS when asked by your escrow officer to do so. In short, do NOT spring any last-minute surprises on the buyer.
The reason I stated the above is because this is what BAC required of its “Deed-in-Lieu Plus” participants in 2008/09, two of which I assisted. They even sent local RE brokers to check the condition of the property and pick up the keys (IF in satisfactory condition) BEFORE accepting the Deed-in-Lieu from the borrower and giving them their $3K “walking-money” check.
This all seems like a “no-brainer” to responsible Piggs but is NOT the norm for the majority of “short” sellers. Most of them “accept” the SS offer and then try to scam their way out, taking what they think they can get away with and leaving truckloads of debris in the house and lot for the buyer to work to clear out and pay to dump. Following the SS contract seems to be a tall order for a lot of short “sellers.”
Also, it is unspoken in BAC’s “program rules” but I believe these letters are only being sent to bubble-era purchasers whose I/O or Option ARM mortgages were recasted or persons who refied since their “bubble-era” purchase for lower payments only (no cash) and then came upon a hardship and had to default (unemployment, death of spouse, divorce, etc). I seriously doubt BAC is sending these letters to those who “cashed-out” or have any junior liens at all, unless THEY are the servicer/note-holder and it was also purchase money. (It was common for Countrywide to loan for an 80/20 purchase with an 80% 1st TD and a 20% 2nd TD during the “bubble era.”)
If any Pigg hears of borrowers with Countrywide PM seconds which were sold to investors getting these letters, I’d be interested to know this.
One last caveat is that BAC must be both the note holder AND servicer of the mortgage. Letters were NOT sent to those borrowers where BAC sold their note(s) to FF. Most of these letters were likely sent to qualified Countrywide subprime borrowers (“inherited” by BAC).
http://mediaroom.bankofamerica.com/phoenix.zhtml?c=234503&p=irol-newsArticle&ID=1692738&highlight
May 18, 2012 at 11:23 AM #744087bearishgurlParticipant[quote=briansd1]…But overall, I think that the BofA deal is win-win for the bank and homeowners who are underwater. Up to $30,000 is reasonable compared to the cost to foreclose, manage, maintain and resell the properties.[/quote]
They’re not even paying anywhere NEAR $30K for garden-variety conforming mortgages. The maximum of $30K would probably kick in on a non-performing “super-conforming” or jumbo product. I see most “eligible” borrowers in SD likely getting letters offering them $12K to $20K (+ $3K “walking money”).
For those that “cashed out,” ESP repeatedly, I see the foreclosure in process being expedited or foreclosure looming in the near horizon.
May 18, 2012 at 11:24 AM #744088briansd1Guest[quote=flu]
You know what? That’s why I want to buy more rentals… I want that check money back, and I want to get my cut… [/quote]Why that schoolyard mentality of wanting something because some other people got something else? It’s not a competition.
I agree that now, and in the next few years, is a good time to buy rentals. Think of it an opportunity to build your own portfolio because of some dislocations in the marketplace.
The article said BofA will pay $13,000 to a guy for completing the short sale. He maintained the property and kept it good condition desirable to a resale. He kept the values in the neighborhood up and filled out the disclosure form for the buyer; and he’s doing all the things that BG mentioned. All of that has value more than $13,000. How much do you think BofA would have to pay lawyers and management companies in a foreclosure?
BTW, I’m thinking that Greece will exit the Euro. That will cause interest rates in America to drop to record lows. There’s your opportunity to refinance yet again; or buy at record low interest rates.
May 18, 2012 at 11:40 AM #744090sdduuuudeParticipantAs I have said before – the banks and FBs deserve each other. They can do whatever they want as far as I’m concerned, except when the taxpayers are backstopping/bailing them out.
At least this looks like a plan that isn’t sucking from the tax payers, unless I’m missing something, which I’m sure I am.
May 18, 2012 at 11:44 AM #744091poorgradstudentParticipantUnless I’m misreading this, it sounds like a Free Market solution to a problem. There may be some behind the scenes government pressure, but this is clearly a case of banks wanting to get some of these bad mortgages off their books without deflating the overall housing market too much.
If you believe the free market is always right and perfect, this seems logical, right?
May 18, 2012 at 11:45 AM #744092poorgradstudentParticipantAlso, why is this OT? Isn’t this very much ON topic? 🙂
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