Need Financing with Bad credit

[SK in CV]

As I said BG, they’re incompetent. They are ill equipped to deal with distressed assets. Keep in mind, for the most part, we’re not talking about banks, we’re talking about loan servicing organizations. They get paid a tiny margin for collecting payments. Because they are not (always) the investor, they have little motivation to complete mods. They make more on foreclosure but they don’t have the manpower. (hence the robo-signing, mostly in judicial foreclosure states.)

[bearishgurl]

[quote=SK in CV]As I said BG, they’re incompetent. They are ill equipped to deal with distressed assets. Keep in mind, for the most part, we’re not talking about banks, we’re talking about loan servicing organizations. They get paid a tiny margin for collecting payments. Because they are not (always) the investor, they have little motivation to complete mods. They make more on foreclosure but they don’t have the manpower. (hence the robo-signing, mostly in judicial foreclosure states.)[/quote]

Nevertheless, paying trustee fees early on represent but a very small portion of total loss to an aggrieved lender compared to them letting a trustor squat for months/years causing them to also have to pay their back taxes, poss back HOA dues and unpaid homeowner’s insurance premiums upon the filing of a (very late) trustee’s deed. This exacerbated loss was all due to the lenders’ sitting on their hands … for YEARS.

It JUST DOESN’T TAKE a rocket scientist to figure out how to get the proper minimal paperwork to a trustee to initiate foreclosure. Lots of folks in CA (possessing only GEDs and HS Diplomas) have been performing these duties for decades.

At the point of 111 days of default (141 days in recent years) it doesn’t matter what the market value or even the condition of the property is. The property will either sell at a trustee’s sale for more than the opening bid amount or it will revert back to the foreclosing beneficiary.

Both are perfectly fine remedies.

There’s NO NEED to make a 15-page report or even get an appraisal. At that point, an appraisal is moot. The aggrieved lender’s only focus should be recovery of the asset as soon as allowable by law. Even if it takes Sheriff’s deputies setting the trustor’s belongings on the sidewalk and changing the locks after the trustees’ sale.

That is a partial description of the statutory scheme of the law. Period.

It is a lot easier (and cheaper) to hire people to clean up and dispose of an asset you have full control over than to endlessly play games with an asset a (nonperforming) “owner” (in name only) has control over.

[SK in CV]

[quote=bearishgurl]
There’s NO NEED to make a 15-page report or even get an appraisal. At that point, an appraisal is moot. The aggrieved lender’s only focus should be recovery of the asset as soon as allowable by law. Even if it takes Sheriff’s deputies setting the trustor’s belongings on the sidewalk and changing the locks after the trustees’ sale.

[/quote]

There is a reason to get an accurate estimate of value. Do they put in a credit bid for the full amount of the loan? Should they let it go at auction for some amount less than the full amount of the loan?

But overall, you’re right. It isn’t complicated. Yet they still don’t do it. Why is that? There is not now, nor has there ever been any motivation for letting any individual asset rot in delinquent status. There are those that have argued that the delays as a whole have been part of some sort of grand scheme to manipulate the market to maintain stability, and create a market where foreclosures would be systematically released into the market. The hidden inventory that so many expected to eventually hit the market. I don’t buy it. That inventory has never showed up. I think they (the lenders and loan servicers) really are that bad at managing distressed assets.

[bearishgurl]

[quote=SK in CV] . . . I think they (the lenders and loan servicers) really are that bad at managing distressed assets.[/quote]

How did they get so bad?

Was it the fact they were only “servicers” and had little or no financial stake in the mortgages they immediately sold to GSE’s, instead of holding in their portfolio (as lenders in the past did)?

Was it the quality and/or inexperience of their workforce who may have had an inferior public education to their predecessors?

Was it the sheer volume of defaults (both involuntary and strategic), which overwhelmed their employees and they couldn’t hire fast enough to get new employees up to speed?

Or was it the political pressure to initiate a “workout” with all these deadbeats, who, sensing the political pressure on the lenders, worked the “system” to bleed it for all it was worth?

OR, perhaps it may have been a combination thereof.

I still don’t see any of these reasons as an excuse to allow a defaulting trustor to “squat” for THREE YEARS or more, as many of them were able to.

That’s enough time to get a “wayward trustor” thru law school, without any living expenses except for utilities!

This little “experiment” wasn’t fair to the poor slobs who hung in there and kept making their house payments on time (even during hardships).

[SK in CV]

[quote=bearishgurl][quote=SK in CV] . . . I think they (the lenders and loan servicers) really are that bad at managing distressed assets.[/quote]

How did they get so bad?

[/quote]

They were always this bad during RE bubble bursts. I didn’t have any direct knowledge of it during the bust of the early ’80’s, but I was told it was the same. I know it was just as bad with the bust of the late 80’s. I worked pretty closely with a bunch of former RTC asset managers when I did a lot of bankruptcy work in the early 90’s, liquidating lender portfolios. The incompetence in the process is truly incomprehensible.

I don’t think political pressure was ever a meaningful factor, except to the extent it caused some small delays, eventually everything returned to the norm.

[bearishgurl]

[quote=SK in CV][quote=bearishgurl][quote=SK in CV] . . . I think they (the lenders and loan servicers) really are that bad at managing distressed assets.[/quote]

How did they get so bad?

[/quote]

They were always this bad during RE bubble bursts. I didn’t have any direct knowledge of it during the bust of the early ’80’s, but I was told it was the same. I know it was just as bad with the bust of the late 80’s. I worked pretty closely with a bunch of former RTC asset managers when I did a lot of bankruptcy work in the early 90’s, liquidating lender portfolios. The incompetence in the process is truly incomprehensible.

I don’t think political pressure was ever a meaningful factor, except to the extent it caused some small delays, eventually everything returned to the norm.[/quote]

If your theory is true, should the “cat get out of the bag” that RE lenders, on the whole, are incompetent at nonjudicial foreclosure, and have always been, this doesn’t bode well for CA lenders going forward as their borrowers, in the back of their minds, will believe they can squat into oblivion before being foreclosed upon so many will have few qualms about defaulting, whether involuntary or otherwise.

Depending upon the solvency of the individual borrower, the “tipping point” between delinquent trustors taking a big hit on their credit report for defaulting will be offset by being “unjustly enriched” by the “length of squatting-time granted them” by their lender.

The delinquent trustors of modest means who never had anything to lose by overborrowing were the winners in this game, as it is actually the “length of time squatting granted” that lenders allowed delinquent trustors which has been and will be to the lenders’ detriment more than the borrowers.

[CA renter]

[quote=SK in CV]

But overall, you’re right. It isn’t complicated. Yet they still don’t do it. Why is that? There is not now, nor has there ever been any motivation for letting any individual asset rot in delinquent status. There are those that have argued that the delays as a whole have been part of some sort of grand scheme to manipulate the market to maintain stability, and create a market where foreclosures would be systematically released into the market. The hidden inventory that so many expected to eventually hit the market. I don’t buy it. That inventory has never showed up. I think they (the lenders and loan servicers) really are that bad at managing distressed assets.[/quote]

By stalling the foreclosure process, the lenders were able to sell off or refi out of many of these bad mortgage assets. For those loans that were not GSE loans, the Federal Reserve’s ZIRP policy, along with various modification/refi programs, enabled lenders with high-risk mortgages (and related securities and derivatives) on their books to get out of these positions when borrowers refinance into govt-backed mortgages.

With the Homebuyers’ Tax Credit, reduced inventory (resulting from the delayed foreclosures), and low interest rates, the value of the lenders’ collateral was kept at artificially high values which make the bailouts look less egregious to taxpayers and other market watchers.

The lenders were stalling the foreclosure process because they were buying time in the hopes that one of the many foreclosure prevention programs and asset-price inflation schemes would work. At this point, it looks like it’s worked for many lenders who would have been taking huge losses by now if not for all of the manipulations.

The delinquency rate is still very high, though.

http://research.stlouisfed.org/fred2/series/DRSFRMACBS

[ucodegen]

[quote=FlyerInHi]CAr, the borrowers were not victims.
They abided by the terms of their loans when they stopped making payments and the banks foreclosed on the collateral. Simple resolution to a business contract between 2 private parties.[/quote]Ok.. lets take it from this. The banks then realize that these particular people will then drop the property and payments when things get a little tight or it doesn’t look like they could immediately flip for a profit. Seeing that these people would do that, means that they are a poor credit risk. The banks then charge them a higher interest rate and insist on a larger down payment because of the greater risk that loaning money to these people entail. When a bank forecloses, it is getting the property back in lieu of having the loan paid back. Seems like it might be equitable unless you realize that sometimes the amount owed is more than that property is worth. That means that the bank ate the loss on this person, while this person gets to walk away without owing the deficit on the loan. — once burned twice shy.. and of course the FICO score takes a hit– which is how banks account for the risk.

[quote=CA renter]The lenders were stalling the foreclosure process because they were buying time in the hopes that one of the many foreclosure prevention programs and asset-price inflation schemes would work. At this point, it looks like it’s worked for many lenders who would have been taking huge losses by now if not for all of the manipulations.[/quote]The banks ‘delaying’ foreclosures were for two other reasons as well.

[CA renter]

[quote=ucodegen]The banks ‘delaying’ foreclosures were for two other reasons as well.

They were overloaded and were unprepared for this many.

Once the bank forecloses, they have to realize the mortgage/loan at the actual value that they can get from the property they have foreclosed upon, and therefore book the actual loss versus using the ‘paper’ value on the loan. Could make many more banks insolvent.[/quote]

Agreed, though I believe that they did know about the looming foreclosure crisis. They just had to pretend that “NOBODY could have seen it coming!” in order to make the bailouts more palatable to Joe Sixpack.

[treehugger]

+1 to BG! Only thing missing in the “strategic default” is the cross purchase of another property BEFORE the default hit your credit, but I guess they needed the year of not paying the mortgage to build up the capital….

I think most lenders and realtors are worthless and unfortunately most of us in the general public are too dumb to realize. I sincerely appreciate all of the advice I received from HLS on my previous home purchase. He spent so much time educating me I guess I was spoiled and didn’t realize all lenders may not be that forthcoming.

All that being said, I am still open to that “pocket listing” shortsale if anybody wants to unload one….cheap.

[ucodegen]

[quote=CA renter][quote=ucodegen]The banks ‘delaying’ foreclosures were for two other reasons as well.

They were overloaded and were unprepared for this many.

Once the bank forecloses, they have to realize the mortgage/loan at the actual value that they can get from the property they have foreclosed upon, and therefore book the actual loss versus using the ‘paper’ value on the loan. Could make many more banks insolvent.[/quote]

Agreed, though I believe that they did know about the looming foreclosure crisis. They just had to pretend that “NOBODY could have seen it coming!” in order to make the bailouts more palatable to Joe Sixpack.[/quote]I have seen too many ‘banker’ types that don’t have a clue. All their ‘models’ are momentum based. Reversals happen so fast that momentum models can’t catch it until most of it is over or it is too late.

[CA renter]

[quote=ucodegen][quote=CA renter][quote=ucodegen]The banks ‘delaying’ foreclosures were for two other reasons as well.

They were overloaded and were unprepared for this many.

Once the bank forecloses, they have to realize the mortgage/loan at the actual value that they can get from the property they have foreclosed upon, and therefore book the actual loss versus using the ‘paper’ value on the loan. Could make many more banks insolvent.[/quote]

Agreed, though I believe that they did know about the looming foreclosure crisis. They just had to pretend that “NOBODY could have seen it coming!” in order to make the bailouts more palatable to Joe Sixpack.[/quote]I have seen too many ‘banker’ types that don’t have a clue. All their ‘models’ are momentum based. Reversals happen so fast that momentum models can’t catch it until most of it is over or it is too late.[/quote]

You don’t need “models” to tell you that people who make $36,000/year can’t afford a $700K house. And you don’t need “models” to tell you that a typical maid and a gardener couple are NOT bringing in $250K/year, no matter how many times they write it down on their “no-doc” loan application. This isn’t rocket science. I do not believe for a second that the financial gurus truly didn’t know what they were doing. If this were true, then we should all be very, very afraid because these are the people running our economy, and they are being paid handsomely (the most overpaid people in our society) for doing so.

[SK in CV]

[quote=CA renter]
You don’t need “models” to tell you that people who make $36,000/year can’t afford a $700K house. And you don’t need “models” to tell you that a typical maid and a gardener couple are NOT bringing in $250K/year, no matter how many times they write it down on their “no-doc” loan application. This isn’t rocket science. I do not believe for a second that the financial gurus truly didn’t know what they were doing. If this were true, then we should all be very, very afraid because these are the people running our economy, and they are being paid handsomely (the most overpaid people in our society) for doing so.[/quote]

I suspect a lot of people will be surprised, and many even doubt that it’s true, but a lot of those loan applicants NEVER wrote down their income, and never claimed that they had the income on their loan apps. In 2008ish, I reviewed scores of loan packages for loans that were either delinquent and/or already in late stages of the foreclosure process. Many (and I’m almost inclined to say most) of the applications never had anything written on them besides the borrowers signature. (And I did have every single document in their loan file.) I interviewed many of them, and many of those I interviewed never claimed that they made the income on their applications, except the signature on the final loan app signed at the close. In many cases (particularly in the instances you describe), those income figures were provided by someone other than the borrower.

[CA renter]

Fair enough. But can we agree that a loan package where hundreds of thousands of dollars are at stake should indeed require income and asset documentation/information from the borrowers?

Again, if these “financial gurus” created a system in which borrowers of little means are able to obtain access to hundreds of thousands of dollars that they could never pay back, then we have some serious problems on our hands. I cannot, for the life of me, think of a single reason why any intelligent financial experts would think this was a good idea and that there would be no negative consequences that would result from these types of loan programs. No “models” needed for this.

[bearishgurl]

[quote=SK in CV]…In many cases (particularly in the instances you describe), those income figures were provided by someone other than the borrower.[/quote]

SK, those “income figures” had to be listed on the application somewhere. Then the applicants SIGNED the application, in essence, stating that they were declaring that the number represented on that document as their income was, in fact, true.

So, the “gardener and the maid” at all times KNEW what income they were using to obtain a (“80/20” or 100% LTV) mortgage on whatever kind of property they were attempting to buy at the time. On my block, this “real-life gardener and maid” (yes, for reals, Piggs) managed to pay $590K for a property which sold for about $267K just 2.5 yrs later as an REO.

Just because a (greedy, corrupt) “loan officer” filled in bogus income figures on a mtg application that the borrower signed and, in doing so, blatantly lied about, this doesn’t reduce the culpability of the borrower in the massive foreclosure mess we experienced from 2006 forward. In ALL of these cases, unqualified borrowers were attempting to purchase properties (and most were successful in doing so) which clearly were out of their league. These borrowers did so with their eyes wide open, IMO.

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