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Bad Times Ahead for HAMP Rate Resets on Loan Modifications
If you pay your mortgage through a HAMP loan modification originated in 2009, be prepared to be hit with a major rate reset beginning as early as October of 2014. As I read the Treasury FAQ about Hamp rate resets, it became crystal clear why so many of my Sacramento short sales lately involve homeowners who have been approved by the HAMP program. My business of selling Sacramento real estate and especially short sales does not lend itself to helping sellers do loan modifications because, contrary to popular belief, I am not a lawyer. I am a real estate agent and I sell homes. To that effect, loan modifications affect my business only in a peripheral sense.
However, I vividly recall when the Home Affordable Modification Program, HAMP, was initiated by the government in 2009 to help homeowners stay in their homes. When it first began, many homeowners were rejected for HAMP and, having no other course of action, they turned to short sales, which meant eventually moving out of their homes, and not the preferred alternative. But over the years, the government and the banks got their acts aligned together or maybe the banks just figured out how to extract more money from the Treasury, and a large number of distressed homeowners received loan modifications.
One of the key qualifiers for the program was to be employed, so that left a lot of Sacramento homeowners in the dust. For those who managed to hang on by hook or by crook to a job, they probably were qualified for a loan modification. Like the bandage it is, though, a HAMP loan modification is only a temporary solution.
I advised people back then that doing a loan modification might be similar to putting a gun to your head and just not pulling the trigger for a few years. When you’re desperate, you’ll grasp at anything that keeps you in your home. I understand that. People tend to hope for the best. The sad thing is life over the years did not get proportionately better for many people in Sacramento. My husband, for example, lost his job in journalism in 2008 and has yet to recover.
The flaw in the HAMP program, if you will, is the fact interest rates reset after 5 years and every year thereafter. So if you took out a loan modification in 2009, your rate could go up by 1% and your payments could jump by $200 this October. If you took out a loan modification in 2010, you’ll be hit next year. And the rate continues to reset year after year. It doesn’t get any better than you have it right now.
Which is why some sellers will find they can no longer afford to pay their mortgage nor stay in their home due to the HAMP rate reset, and they will turn to the best Sacramento short sale agent they can find, which will be me. I have sold more short sales in the Sacramento area than any other real estate agent since 2006. I know how the banks negotiate, how to get your short sale approved and, best of all, you’ll be done with it now and forever. There is no out-of-pocket cost to you, all fees are paid from proceeds at closing. You can call the #1 short sale agent in Sacramento: Elizabeth Weintraub at 916.233.6759, at Lyon Real Estate.
The good thing — if there is such a thing as a good thing when it comes to short sales — is the fact that if you were approved for a HAMP loan modification, you are practically guaranteed to be approved for a short sale.
Why Home Buyers Won’t Buy a Short Sale in Sacramento
Like any other home on the market today, even the few short sale homes need to be highly desirable in some way to entice a home buyer to buy a short sale in Sacramento. Price alone won’t do it because the short sale lenders will demand market value. I get emails from agents who ask if I would consider wasting my time and the seller’s time to submit garbage offers on behalf of their greedy little buyers who love to lowball, and you’ve got to wonder what planet these agents live on. As additional information, the agents might offer up the fact they’ve been successful with this approach once years ago, like anybody cares.
Oh, geez, thanks for telling me. I smack my head. Dang-nabit, I had no idea.
They might say let me tell you about my buyer. No, don’t tell me. I don’t care. I don’t want to hear about his or her motives, angles, mission. I care only if the buyers are willing to do what it takes to get the lender to approve the short sale. Will they wait for approval and not cancel? An agent asked yesterday if it was OK for the buyer to cancel after I worked my tail off to obtain the short sale approval letter, in the event there was something about the property the buyer didn’t like. Sure, I replied, but be aware that I will then drive over to that buyer’s home and slash the tires on his car. Oh, he laughed and laughed.
Wow, we really want to take that offer. The buyer sounds so dedicated.
Today’s buyers, most of them, don’t want to wait for the short sale process. If they do decide to buy a short sale, it’s because the home is unique and it’s the only one like it on the market for miles around. Other short sale buyers are those who have a home to sell, and they are are buying contingent on selling. No fuss, no muss, no risk. If the contingent home is my listing, for example, I know their home will sell because they will be realistic, so those generally work out. But there is not a flood of buyers for short sales today.
I sold a Victorian short sale home in downtown Sacramento a few days before I left for my long winter vacation early last December. I worked on that short sale while enjoying an oceanfront view and warm breezes. Everybody was happy at the inception. We submitted all of the required paperwork to both banks: to the Bank of America short sale department and Chase. Chase had recently joined Equator but was not yet in Equator for this type of Chase short sale. Before the end of January, we had HAFA short sale approval from Bank of America. Eureka!
Chase Bank, because its HELOC department wasn’t yet in Equator, dragged its feet for another 60 days, despite repeated requests and hammering. The negotiator at Bank of America refused to give us an extension on the short sale and instead insisted on starting over. An unusual shitty move when the servicing was not sold. When Bank of America re-opened the file, it somehow messed up processing it as a HAFA. A logical person would think Bank of America vendors look at the previous file, but that would be like expecting a Sacramento real estate agent to study the history in MLS of a previous listing — just ain’t gonna happen.
Despite the HUD identifying this transaction as a HAFA and the notes I routinely slipped into Equator as a reminder, nope, it was processed as a traditional. A short sale agent doesn’t ordinarily discover these types of bank screw ups until the counter is issued in Equator. The seller didn’t care about HAFA by that time.
At several points, the buyer wanted to cancel. She was tired of waiting and didn’t really understand the delays. She delivered ultimatums, which don’t work. At another time, the sellers wanted to cancel. They had moved out and no longer cared about receiving the HAFA incentive; they just wanted it closed. The opportunity to eat the negative cash flow and rent it was beginning to look attractive to the sellers. In between, neighbors called to ask if was OK for them to steal the seller’s cats and take the critters to city animal control. Like wha? My main concern was the amount of time it would take Bank of America to process this as a traditional short sale after Chase finally got its act together.
I find my way around stumbling blocks. It’s what I do. The short sale closed this week, with the original buyer happy as a clam, extremely excited and relieved. The sellers are ecstatic. They appreciated my calm demeanor and keeping them on track. Approval from both banks took 5 months. That’s unusual and a long time.
Although I have closed hundreds of short sales in Sacramento, there is never a guarantee that we can get both of the short sale banks to cooperate and issue approvals at the same time. Often issues and delays pop up, regardless of how streamlined we make the process. If something can go wrong on the other side, it often does. Patience is the key to a short sale. And buyers in Sacramento don’t have a lot of patience in today’s real estate market.
Sacramento Short Sale Approval From US Bank
Sellers ask me if it’s impossible to get short sale approval for a US Bank short sale because so many Sacramento short sale agents seem to encounter difficulties working with US Bank. I would not say that US Bank is harder to work with than any other short sale bank, but the US Bank short sale process is not as streamlined, per se, as other banks. A short sale that might take 4 weeks through Bank of America can easily take 4 months with US Bank. You’ve just got to have patience.
Take my recent US Bank short sale, for which I have been working with two loans, both at US Bank. This short sale has been in short sale negotiations for 2 years now. Two long years! Most of the time when a short sale takes this long, it’s because the buyers bailed. The buyers might hang in to wait 3 months or so and then they cancel the contract, just when approval is about to arrive. I’ve personally witnessed this phenomena over and over. They lose faith. They give up. Just when they should not.
We try to engage buyers, keep them informed and updated every single week, but no matter how hard we can try to nail them to the front door, they wiggle away. When the buyer cancels, the short sale starts over.
Having said all of this, most of the trouble in this particular transaction has been a denial issued by US Bank. I generally don’t let denials dampen my enthusiasm. A denial just means we are one less negotiator away from approval. One less person to deal with and one less obstacle to overcome. After a revised analysis, I repackage the short sale and resubmit. My philosophy is somebody is not listening to us or we did not present the facts in a light the negotiator can accept.
I can’t recall offhand how many rejections and denials we were issued on this particular US Bank short sale. US Bank rejected the sellers a few times. But we finally received that golden letter of short sale approval and release of personal liability. Two years later. You have no idea how ecstatic the sellers are right now. If there’s a way to get that short sale approval letter, this Sacramento real estate agent will get it. Just like if there’s a way to sell your home in Sacramento, I will do it. It’s called perseverance and determination.
What is the Problem With 2014 Sacramento Short Sales?
The problems with Sacramento short sales in years past used to lie with the banks and the buyers, but those days are long gone. Buyers and short sale banks are not the source of our misery today. Most of the buyers who enter an agreement to buy a short sale are willing to wait it out and realize there are a few fees the bank might not authorize such as pest and home warranties and 100% of the escrow fee. They possess realistic expectations. The banks have invested money and effort into establishing entire short sale departments that mostly did not exist from 2006 to 2008. They’ve put systems and procedures in place, and are constantly tweaking their efficiency and effectiveness.
There are some banks that face little struggles now and then such as the Chase HELOC departments in Equator and the banks that try to satisfy regulations and cope with the fallout from the National Mortgage Settlement, yet cause months of delays due to ineptness, but for the most part, you can’t really blame the banks anymore when a short sale takes forever. OK, you can blame Fannie Mae and Freddie Mac, but even those guys are shaping up their systems. Rarely a day goes by when I don’t receive a timely email from somebody at Fannie Mae to say by golly they have received the BPO, and they’re still working on a pre-approved value. It’s better than a poke in the eye with a stick, even if it’s sorta meaningless after 2 weeks.
I’m not getting a lot of pushback and attitude from buyers either because they are educated now. They do their own homework online, they talk to their buyer’s agent, and they’re prepared to wait for short sale approval. They realize that when they go into an escrow in which the Best Sacramento Short Sale Agent is negotiating, that escrow is likely to close. I cannot remember the last short sale that did not close, and I’ve closed hundreds of them — more than any other real estate agent in a 7-county area since 2006.
The problems I’m seeing today do not stem from buyers nor the short sale banks. Nope. They cannot shoulder the blame anymore in today’s Sacramento short sale world. Instead, the problems tend to stem from the sellers themselves. There’s not always a full proof way to figure out which sellers deserve help and which don’t really give a crap. So, try not to blame the agent if the short sale goes south because the sellers messed it up. Most of the short sale agents I know are professionals who care deeply about their sellers and sometimes can inadvertently overlook their shortcomings.
Short sale agents need to be more vigilant, especially since short sales make up such a small portion of our market (about 10%) — short sales now appeal to smaller pools of buyers and will take longer to sell. Fact, Jack. My advice to fellow Sacramento short sale agents is try to make certain the effort you expend is for a seller who is willing to cooperate and see it through to the end. Otherwise, cut the losers loose. You owe it your own sanity, and you owe it to the buyers. You may represent the seller, but you still owe honesty and good faith dealings to the buyers.
Winning the Cat Box Wars is Like Closing a Difficult Short Sale
Getting my cats to switch over to the Breeze litter box system is sort of like getting a short sale — with all of its moving and opposing parts — to close escrow. It becomes a matter sometimes of who will be last person standing at the OK Corral — who has the most staying power. Who will emerge the victor — will it be the 3 cats who have always used litter and are not exactly known for changing their preferences? Or, will it be me, the caretaker, who has to put up with a few extremely stinky cat boxes?
The way the Breeze switchover works is you have to stop cleaning the cats’ existing litter boxes and wait for your cats’ cleanliness instincts to kick in. The idea is when they no longer have a clean cat box, they will embrace the Breeze litter box. When that happens, you can remove the stinky old cat box and they should continue to use the new Breeze litter box. So, who has the most stamina? Me or the cats?
I understand stamina and perseverance. I am a real estate agent in Sacramento with extensive experience in closing short sales. Further, I have sold more than $65 million in short sales, according to the January 2014 Trendgraphix report, which is more than other real estate agent over a 7-county area. When I say that not every short sale is a slam dunk, thank you, ma’am, you better believe it.
A short sale is closing next week that had been denied 3 or 4 times — I can’t recall. I’ve been working on it for more than a year. The buyer has been waiting all of this time, very patiently. When the nearly impossible happened and we received the short sale approval letter from the first lender, we still had a battle to settle with the second, which involved more negotiation with the first lender. In the end, both lenders finally agreed to close. Each gave a little bit to make it work.
But bottom line, the agents and the buyers and the sellers all clung to the hope it would close. We didn’t lie down in the street and moan: Oh, shoot me now and put me out of my misery. And that’s why I think I will win the cat box wars. Plus, I found evidence of usage this morning, which is cause to celebrate. Oh, how a little poop excites a weary warrior!
