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Beware of the Short Sale Service Release
When writing to another agent today about short sale service releases, it made me realize how little the average consumer knows about this practice. A service release happens when a bank sells the servicing rights for a loan to another bank. Some banks are the actual investor, the entities that own the note, but many banks are nothing more than a collection agent for the loan. The bank takes the money from the borrower, pockets a fee for its services, and then distributes the rest to the investors. It has other duties outlined in the PSA such as handling the foreclosure, which pays the bank even more money. That’s one of the reasons why some banks can prefer foreclosure to short sale.
Bank of America seems to be in the middle of a big sell off. It is selling servicing rights to other banks. At first I thought maybe it was Fannie Mae who fired Bank of America, but it seems to be the other way around. In one such Sacramento short sale, we had put a pre-approved Bank of America Cooperative Short Sale into escrow. The seller had signed the Borrower Acknowledgement of Interest — known in short sale lingo as the BAI. This is not a commitment on the part of Bank of America but most people take it as such.
The short sale progressed smoothly, as most Cooperative Short Sales do these days. We received the counter in Equator, which removed a few miscellaneous fees from the purchase contract that Fannie Mae would not allow. Usually, when we approve the counter offer, we get the short sale approval letter anywhere from 24 hours to 10 days later. Instead of receiving the approval letter, though, we received a decline of short sale because the bank had sold the servicing rights to Seterus. Our old friend, IBM.
Seterus does not Cooperative Short Sales. Seterus does traditional short sales. Long story short, Seterus rejected the short sale. The seller did not receive her $3,000 relocation incentive. The buyer did not buy the home. The entire transaction blew up, and there was nothing we could do about it. The home went to foreclosure. If you don’t think service releases produce horrific results, here is one for the record.
Wishful Thinking Won’t Close a Short Sale
I’m not from Missouri, so you don’t have to show me the money. But I do have built-in radar that makes me question certain things. If something seems off, I tend to explore it. That’s my nature. I grew up with the expression: Question authority, because I lived through the 1960s. You will notice I did not say I completely recall the 1960s, but I did survive those years.
Today the expression is: Question everything. When one is a Sacramento short sale agent, one tends to question everybody and everything anyway because a real estate agent has a legal fiduciary to her client. I look at what people do and not so much what people say. Sometimes, agents can be bamboozled. Some of them so badly want to hold a deal together that they’ll let things slide and they’ll believe their own wishful thinking. For example, I am working on a short sale in which the buyers were unwilling to meet the bank’s demands. They sent a signed cancellation. Then, after talking with a third-party vendor for Bank of America, I was able to get the bank to agree to look at a different solution.
I presented this solution to the buyers in the form of an addendum. That was a couple days ago. The buyer’s agent says the buyers will sign the addendum. Every time I ask him for it, he says it is coming and he is working on it. But the addendum has not arrived. There comes a point in which somebody needs to be the grown up in this situation. Today is that day. We need to examine the facts. The facts are we have a signed cancellation. We do not have a signed addendum. We have a verbal that the buyers will sign the addendum but the addendum is not in my hands.
It’s nothing personal, but that short sale is going back on the market today. My advice to my sellers is to sign the cancellation and find another buyer who is willing to perform. As a professional courtesy, we gave the buyer’s agent until 9 AM today to produce the document. If it shows up, the home won’t be released to inventory, but I am not holding my breath. I wish people would do what they say they will do. But that’s what they call wishful thinking. If you’re looking for a short sale in the Sacramento area, call me.
A Cooperative Short Sale is a Privilege; It’s Not a Right
If you ask a lawyer if you should file a lawsuit, that answer will probably be yes. Just like if you ask a Sacramento real estate agent if this is a good time to buy, you’re gonna hear YES, this is a good time to buy. Because that is asking a person in business for himself or herself if you should do business with that person. It is rare for a person in business to turn away that business. If a person routinely turned down a source of potential cash flow, sooner or later that person would go out of business. But many people do not understand that concept.
Another concept people do not understand is if you are trying to buy a short sale, that short sale might not be approved. No bank is required to do a short sale. A short sale is a privilege; it’s not a right. Even if the bank agreed to do a short sale, a bank can say no later on. For example, if I were an investor who needed to do a 1031 exchange, I would not be trying to buy a short sale. Because when you do a 1031 exchange, you have a certain period of time in which to identify a property and a certain period of time in which to close. Once those time frames have come and gone and you haven’t closed, you’re hosed. Your preferential tax treatment goes bye-bye.
I have closed short sales in which an investor was doing a 1031 exchange. But it was risky for that investor. Because there’s no guarantee. It’s risky for any short sale buyer. It says so right in the documents a buyer signs.
Just like there is never a guarantee with a Bank of America preapproved Cooperative Short Sale. Just because the bank approved a Cooperative Short Sale does not mean the bank will approve an offer from a buyer. And just because the bank might approve an offer from a buyer is no guarantee that Bank of America will close escrow. Bank of America reserves the right to pull the plug at anytime, and there’s not a darn thing a buyer can do about it. There is even less recourse when the investor along the way fires Bank of America, like Fannie Mae seems to be doing lately.
Oh, Bank of America has a fancy name for getting fired. It’s called a Release of Servicing. But it’s being fired all the same. Fannie Mae recently fired Bank of America right before final approval of a short sale. Instead, Fannie Mae hired Seterus to handle the servicing of that loan. Bank of America was about to approve the Cooperative Short Sale for a 1031 exchange buyer. It had issued a counter offer in Equator and was getting ready to draw the final approval letter. But when Seterus took over the servicing of that loan, Seterus said nope. No can do. Seterus does not do Cooperative Short Sales like Bank of America.
You know who got the short end of that stick? Welcome to the world of short sales. If it were me, I would not give my money to a lawyer to pursue a case without merit against Fannie Mae (aka our government), but some people have little respect for money, much less common sense.
Bank of America FHA Short Sale Approved
Wow, a Bank of America FHA short sale started in December of last year finally closed escrow in November. It took 11 months to close the sale of this Rancho Cordova home. And this was an escrow in which the seller hired and paid a lawyer to negotiate. They did this before they called me. I was hired solely to sell the short sale, not to negotiate, which is a little odd but OK. I do whatever my clients want.
A representative from the Sacramento law firm called the Bank of America negotiator at one point almost every single day. It’s not just a Sacramento short sale agent who struggles with the B of A FHA Short sale processes. Lawyers can fare even worse.
I’ll tell you who has the hardest job in all of this. It’s the buyer’s agent. It’s that Sacramento buyer’s agent who is saddled with the job of having to call that potential homeowner every week or so to explain what’s going on. These agents have to give plausible reasons for the delay yet continue to build hope in their client’s heart. It’s not an easy job by any stretch. Half the time the buyer’s agents don’t know what’s going on because nobody tells them anything. They are not allowed to talk to the short sale bank.
I understand how difficult that job is, and that’s one of the reasons I post my updates online. Yeah, right on my website, you can read Sacramento short sale updates. Buyer’s agents and their buyers can access daily updates. Each property is identified by the street name without the house number. No personal information of either the seller nor the buyer is divulged. It’s mostly actions committed by and requested by the bank so all parties to the transaction can monitor the movement. My Sacramento short sales do not fall into a black hole. Anybody and their Uncle Joe can see that I am constantly on top of my short sales. I am held accountable for my actions.
Which is more than one can say about Bank of America and its FHA short sales. Unfortunately.
You see, there is nothing that I can really do about a Bank of America FHA short sale. Especially when I am not negotiating it. I am not an agent who farms out her negotiations to another short sale negotiator. I care about my clients too much to do that. (Although, sometimes it is necessary to bring in a lawyer, but that’s rare.) I do my own work. I am hands on. As a result, I have learned that I can lessen the damage, the heartbreak, the disappointments by not putting that short sale on the market until we have the Approval to Participate from FHA. That’s the only way I have found to shorten the 8- to 12-month wait for approval on an FHA short sale at Bank of America. After receiving the Approval to Participate, that wait is only 4 to 6 months, and that’s not half as bad.
A Bank of America FHA Short Sale Disaster
This Bank of America short sale doesn’t compare to the Bank of America HAFA that had 25 HUDs. But we’ve had at least half that many HUDs requested already on this Bank of America FHA Short Sale. The negotiator can’t decide what he wants or needs. First it’s THIS, then it’s THAT, then it’s THIS OTHER THING and then he’s back to THIS again. I call it the HUD game. The Bank of America negotiators call it doing business in a normal fashion. It’s enough to make a Sacramento short sale agent watch FOX News. No, not really, nothing would make me that insane.
But I try to have empathy. It’s not easy being a Bank of America negotiator and being despised by so many. The clients can’t stand them and the agents aren’t faring much better. One of them accused my mild-mannered and extremely polite assistant of “bullying” when she asked why he refuses to do what he says he will do. It’s like the guy has suffered a total memory lapse, but I suspect his inability to perform is due to keeping incomplete notes. He will say one thing, and when we call him back he has no recollection of the conversation and says something else.
Unlike Alzheimer victims, the negotiators seem like they are coherent. However, on top of the poor record keeping and inconsistent behavior, is the sudden loss of files on those Bank of America FHA short sales. We have a Sacramento short sale that we started in February. By the end of March, we had approval from Citimortgage, the second lender, which changed its name a while back to One Main Financial. By the end of June, we finally received the Approval to Participate from HUD on this FHA short sale. I guess Bank of America fired the negotiator or maybe she died, hard to say, but she vanished one day. Poof. We got a new negotiator in the middle of September who informed us he had absolutely no paperwork whatsoever.
Maybe he picked up the file, glanced at it, and said: What is this garbage — and threw it into the recycling? Or, maybe the previous negotiator stuffed it in the shredder on her way out the door? I suppose it’s possible a Bank of America employee suffering from a combination of pica and low wages, driven by desperation and starvation, ate it?
This negotiator has asked us to add a dead person to the purchase contract and to all of the paperwork. The deceased person was never part of the contract. Her name was not recorded on the deed; it’s also not on the promissory note and not on the deed of trust. Somewhere along the line, in some ancient paperwork, a clerk at Bank of America typed the deceased person’s name on a file, on a piece of paper. In this negotiator’s infinite wisdom, that means putting a person who does not belong on title on all of the paperwork and on the HUD, which violates federal law (RESPA) as well as several local laws. Negotiators don’t have a real estate background. They don’t understand title insurance. They certainly don’t understand law, although I bet they dream of a career in law enforcement.
This is a $75,000 home in Sacramento. The person I feel tremendous empathy for is the seller. Next to that is the buyer who is sitting idle in escrow twiddling his thumbs. He is ready to close. His lender is ready to fund. The second lender forced the seller to pay $150 to get an extension that is good to next week. We told the second lender they cannot make the seller pay for anything in a short sale as a condition of short sale approval, according to California Civil Code 580e. One Main Financial did not care. It thumbed its nose at the seller and said: pay up or we won’t issue the extension.
Now, the negotiator at Bank of America is asking us to send him a letter from One Main Financial (the second lender) explaining how and why One Main Financial is servicing loans for Citimortgage. See, you can’t make up this stuff. As a Sacramento short sale agent, I see the most incredible crap go down at Bank of America. All one can do is send it to the Executive Office, write about it, and hope the the bank can eventually fix some of its problems.
Overall, Bank of America does a fairly good job with its short sales. But these FHA short sales leave this Sacramento short sale agent slack-jawed, shaking her head. I imagine this will close but not before we step over a few dead bodies. Forget the coffee, Bank of America could probably use some Viagra.
