short sale tale

[blew_it]

I am significantly underwater on my mortgage and wanted to get out of it. I pursued a short sale in order to avoid the restriction on getting a mortgage in the future and because it seemed like the way to minimize the amount of the overall loss. I am distressed only in that my house has turned into a very crappy investment.

I have a non-recourse loan with Chase. My hardship letter was very straightforward and basically stated that this is a bad investment that I was getting out of. I was kind of cavalier about the whole thing because I have a non-recourse loan and I know they can’t go after any of my other assets. Fannie Mae, who now owns the loan, rejected the short sale because I wasn’t distressed enough. The house is now in the process of foreclosure.

I assumed they would do the rational thing (eat their share of the loss and avoid the costs of foreclosing since they can’t pursue a deficiency judgment in California) and they didn’t. I’m not sure of the reason for this. Previously, I had read that banks didn’t care about foreclosure because they were afraid of being sued by investors, and they were also insured by companies like AIG and they would recoup losses through insurance. There may be factors like this at work in my situation that I am not aware of, but it appears to be irrational to me.

Removing myself from the situation, I find the whole thing discouraging for a number of reasons: because more overall wealth is lost. Because the overall loss is bigger than necessary. Because I could easily afford a mortgage on my house at the current market price. Let me be clear: I do not believe I am entitled to any lenience or am the victim of anything except my own poor judgment. I am getting exactly what I deserve. I am just surprised that the other parties don’t seem to be acting in their own interest. The current protocol seems to be unnecessarily wasting money.

I always thought that it was weird and inefficient that banks would set strict short sale/loan modification criteria that are inconsistent with their (nonexistent) legal options, and was curious enough to put it to the test—it was either that or throw more money at a bad investment.

For those contemplating short sales who are otherwise not financially screwed, here is my take: The documentation requirements for a short sale (at least with Chase) were not very rigorous. Chase only requested bank account and pay stub information. If you are in a similar situation as me and want to pursue a short sale, you have to stash your cash elsewhere (they didn’t look anywhere else). You also have to have a “hardship” according to their definition. My impression is that the whole thing is about sticking to appearances—Chase has to appear to sufficiently pursue collection (but they really don’t care), and you have to sufficiently appear to be in distress. If you are not “in distress”, you can probably do this on paper without lying, but you would have to be crafty. I am compulsively truthful and didn’t do this. I just want to let everyone know, the approach I tried was not successful. Hope this info is helpful to others out there in this tough situation.

Regards,
blew_it

[jpinpb]

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.

[jpinpb]

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.

[jpinpb]

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.

[jpinpb]

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.

[jpinpb]

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.

[sdrealtor]

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.

[sdrealtor]

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.

[sdrealtor]

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.

[sdrealtor]

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.

[sdrealtor]

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.

[SK in CV]

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.)

[SK in CV]

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.)

[SK in CV]

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.)

[SK in CV]

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.)

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