San Diego Housing Bubble News and Analysis

Thanks for sharing your story here w/us. It really doesn't make any sense at all why banks would rather take a bigger hit and foreclose than do a short sale. I'm sure there's more than meets the eye, behind the scene explanation for this. Thanks for your honesty.

The problem is you were cavalier about the whole thing so they got punitive on you. Had you been more remorseful you could likely have been successful.

One thing I would add to anyone doing a short sale is not to expect the lender to act rationally or in their best interests. They constantly do quite the opposite. There are so many variables to getting one done properly and it truly depends upon the skill of the agent representing you and more importantly their level of experience. I have closed a couple dozen and get better each time. Beware of so-called short sale experts out there. Every time I see one advertising as such I check out their closed sales and without exception they are all highyly inflated.

Asset managers is stupid.

It has pretty much always been this way. If they acted rationally, they would minimize losses. They don't. They spend enormous amounts of time (and money) in valuing assets, then make decisions which seemingly ignore that valuation, and choose an option which increases their losses. I watched it happen during the downturn in the early 80's, again in the early 90's, and once more during the current crash. It is systemic stupidity.

(In fairness to asset managers, it may in fact be management. I was part of the management team for the court ordered liquidation of a $250 million hard money lender portfolio in the early 90's, and we employed some very competent asset managers that had big bank experience. They provided detailed evaulations of every asset but it was always management's decision to pull the trigger on a deal. I have no idea what level of management pulls the trigger for big bank distressed asset departments. Whoever it is, they do a crappy job.)

I turn to think the underline reason of the seemingly stupid decisions is the result of the recent accounting rule change, which allows banks to use non-realistic valuation for the assets they hold. Banks pushed congress for the change and achieved their intended consequences, i.e. they can now hold bad assets as they were good assets. As such, they would rather hold onto those assets, so their books look better than they are actually are. Short sale will realize the loss and their books will look worse. Same for the pace of foreclosures, they have no urgency to get the loans off the books, instead they like them to stay in, so they do not have to look for new capitals.

It doesn't surprise me that banks aren't acting in their own best interest... they didn't on the way up, either.

May I ask an impertinant question? If the home had kept its value would you be staying in the home? Are you going through foreclosure because the home lost value, even though you still have the means to pay the mortgage you obtained?

I have friends who are pursueing a short sale - but in their case they lost one of the two household jobs. They are going back to renting a smaller place to live within their downsized budget. It sounds, from your tale, that they may stand a better chance of getting the short sale approved since they have a documented "distress" with the job loss.

Be a man and pay your obligations.

UCGal: This is a financial decision. If I held out to the end of my ARM (another 2.5 years) I don't think values would go up enough to enable me to refinance. I think I will have job trouble in the future and am just taking the hit now.

JohnAlt91941: I am "paying my obligations". I just don't have any "obligations". I have a contract that I can get out of if I decide that it's in my best interest to do so, and in this case, that's my best option.

Ditto!

Hell, if depreciation were the sole criteria for jumping ship, then a very high percentage of new car buyers (like 100% of em) would bail out too.

If you can afford the payment then quit your bitchin and do it!

murf2222

Blew it is making a financial decision after weighing the pros and cons and will have to deal with the consequences of the foreclosure. I can't say I wouldn't do the same thing if I were in his situation knowing the home will likely not come back to the value he paid for 10-15 years.

Thanks for the background info.

If your mortgage is way over what you would be paying for rent,and I suspect it is,then yes it is a business decision. If you don't think you will be out from under water in 7 years,then go for it. Let me caution you that we could very well have another bubble and you may ruin your credit for no reason,hell the market went up 3% yesterday,anything could happen. I'm also assuming you are not married,if you know you won't be able to afford it when the loan resets, then you are a renter.

I think what everyone is missing here is that you are not dealing with a bank, but with a person who works for the bank. Yes, a short sale might be in the banks best interest, but is it in the best interest of that person processing the paper work?

Here's a similar story. Years ago I was in a motorcycle accident. Long story short: A guy talking on a cell phone ran a red light and broadsided me. I was injured but fortunately not badly. My bike was totaled. All I wanted was to be paid for the motorcycle. I had health insurance so my medical bills were covered. I naively thought I could deal with the whole thing by myself. I didn't want money for pain and suffering or any such thing. Just pay me for my motorcycle and I'd be happy. I was floored by the treatment the insurance adjuster gave me. He didn't want to pay for the bike, he didn't return calls, he did everything he could to encourage me to go get a lawyer. After a week or two of this, I did just that.

When I talked to my lawyer he explained that at this point the insurance adjuster was happy. The case had now been taken from him and given to the legal department. Thus, the insurance adjuster had less work to do, and could report to his boss that he had dutifully done his job on the case. But the bottom line is that after I lawyered up, the insurance company had to pay a whole lot more (and I do mean a whole lot more) in settlement fees.

I would guess that the person who handles the short sales is in the same boat. They mostly want to get the case off their desk. The interests of the bank, or the investors is not their primary concern, if even much of a concern at all. It was much easier (and probably in their best interests) to just stamp DENIED on your file and go for a coffee break.

Bottom line here is that businesses are just groups of people. Businesses don't have interests really, only people in the business have interests.

XBoxBoy

XBoxBoy's comment raises another possibility: perhaps the bank is concerned about appearances. The analogy to an insurance company is an apt one, in this case.

Think about the days of olde, when insurance companies thought rationally about their bottom line when it came to insurance claims. If it costs more to go to court than to settle, why not save some money and settle? What happened ultimately, as my lawyer told me, is that this pragmatic strategy backfired. People started getting into accidents on purpose just so they could collect a settlement. As a result, many insurance companies go the whole nine yards, regardless of whether it makes financial sense, when they feel they are justified for doing so.

In your case, the bank clearly feels like they can make an example of out of you. In being rational and honest, you gave them the perfect opportunity to turn you down. They're probably hoping that you'll go spread the word amongst other rationally-minded individuals who may be in similar situations.

*gasp*

You're a mole! An unwitting carrier of disease!!

As long as you are willing to take the consequences (credit hit from a forclosure), it sounds like you've thought things through. You are in a better position than many since you have a non-recourse loan.

As I said before - I'm not surprised the bank didn't act in their own best interest. Long term views have gone out the window, it's all about short term views. Xboxboy makes a good point - the person who got your file might not have any incentive to work with you - and it will be more work if they do.

Good luck going forward.

I think Xbox is onto something. The banks already tell everyone who will listen that they are overwhelmed and dont have the staff inplace to do all that the GOV wants.

Well, denying you, even at the injury of the company's balance sheet, lessened the workload at the overworked servicers/modifing dept. This allows them to pass your file on, and work on the cases that may gain them some political traction. If they work with the people the bleeding hearts in congress are hearing from, they get less flack from congress and less political pressure. Congress doesnt care about you, they only care about the people who CANT afford to stay in the home but want to. (Those are the people who are complaining.)

Maybe in some sick way they are acting in the best interest of the bank, just in its political interest and not its financial one. Considering that the GOV owns alot of alot of different companies ( I think Chase got out from under their thumb a few weeks ago) it certainly is a good thing for the company to remain in political good graces. Besides they can always get more money from Unky Ben and the FED if they run out. I am sure he will take your soon to be foreclosed loan as good face value collateral.

This retarded horseshit is what every negotiator at Wamu said right before the bank collapsed. It is also what everybody at what is left of HSBC still says. I know because I spent (and spend) a lot of time on the phone with them.

The common thread:
Unrealistic expectations of irrational borrower morality is what led these banks to make poor risk management decisions and poorer attempts at reform.

The seller's best option is to pursue a short. The bank's best financial bet is to approve the short. However, an arrogant or cavalier letter pisses off a negotiator and he denies it. Considering how many he has on his desk, it is unlikely anything bad will ever happen to him (the negotiator) as a result of the denial. The negotiator is satisfied,the bank loses an additional $40k they did not need to lose and all is right with the world. This is what Alan Greenspan described in his "basic misunderstanding of how the world works" (his words). This is also the basic irony of capitalism. Action based on individual self interest does not equate to group benefit or even self benefit.

The best way out is just to re-apply for the short.
Get a different person on the line, call the executive offices, ask for a supervisor, or just start again. If your agent won't do this, then fire him (or her) and get a new one. We are paid for performance and you owe them nothing if they don't perform.

Good luck dude.

PS:
Also, try not to sound like a tool when/if you talk with the bank. Again, good luck to you sir.

PRECISELY, they have no big interest in doing a short sale as they will have to book the loss.

Urbanrealtor

show me where in a buyers loan contract it says *all-bets-are-off* if the property drops in value?

Am I living in some kinda bizarro-world here? Does signing your name and giving your word not mean ANYTHING anymore?

Let's try and forget for a moment that all parties involved (with buying) were naive and/or greedy. The buyer, the realtor and the bank, but that's not the point.

The point is.............oh crap, I forgot my point, but it probably had something to do with sucking it up and staying within the boundaries of the "spirit of the contract".

Remember the context of the original post here. The loan holder CAN afford the payment.

murf2222

Bump