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Cindy Amrine Case is No Test of the Homeowner Bill of Rights
An article that’s been making the rounds online — some with permission and some postings that were clearly just swiped from the Sacramento Bee — concerns a supposed violation of the Homeowner Bill of Rights law regarding dual tracking. Now, not being your average Joe citizen, this Sacramento real estate agent has read the Homeowner Bill of Rights Law in its entirety. And not being a lawyer, my opinion of this law is not to be considered a legal opinion; instead, it’s just a logical interpretation that any rational person of normal intelligence would most likely draw.
The Sacramento Bee article is about a woman and her family in Citrus Heights who are being evicted because their home on Twin Park Drive was sold on the courthouse steps to a private investment group. The owner, Cindy Amrine (Sherr) hired a lawyer to file a lawsuit against Bank of America, claiming that the bank had no right to dual tracking because of the Homeowner Bill of Rights law.
I’m not saying that lawyers take big wads of cash to file lawsuits and get paid whether or not they win the case, because everybody knows that is a fact. In fact, in this instance, I might even go so far as to say the lawyer knows she won’t win but is filing the lawsuit in a sole attempt to get a settlement for her client. It’s true, sometimes banks will pay money to settle a lawsuit, even if the bank is not guilty. It’s the way our legal system works. One doesn’t have to be guilty to pay off a plaintiff. One can simply decide it’s less expensive to bribe the plaintiff to drop the lawsuit than it is to defend it.
What I find interesting about this case is that people are incorrectly assessing this case as a “test” of the Homeowner Bill of Rights law. That law says a bank is permitted to practice dual tracking during a short sale. It’s right there in black and white. The law also says dual tracking must stop after a short sale approval letter is received, but in this case, there was no short sale approval letter, according to the story in the Bee.
I researched the property history online. The home went on the market in early March. Toward the end of April, it went to Trustee’s Sale and the pending short sale canceled. The Notice of Default had been filed the summer of 2012. I can see where the short sale agent did not expect the home to be sold out from under the seller. But we all know — those of who work in short sales — that the foreclosure department of Bank of America has nothing to do with the short sale department. The departments don’t engage with each other.
For the uninitiated though, I offer this bit of trivia for you. The Homeowner Bill of Rights law stops dual tracking during a short sale beginning January 1, 2018. Read it and weep. I predict this lawsuit by Cindy Amrine will absolutely not change how short sales are handled in California, you can count on it, on all 10 fingers. It does bring awareness that dual tracking is wrong.
The Chicken or the Egg in a Sacramento Short Sale
The bickering that goes on between lenders in a Sacramento short sale remind me of kids. Maybe that’s because we don’t really grow up, we just get wider. Like, I don’t wanna eat it, YOU eat it. I know, let’s make Mikey eat it. Except Mikey is now all grown up, living in New York and earning a living hawking ads. But you know where I’m going with this, right? I’d like to talk about when we have two loans on a short sale. That’s when we run into what comes first: the chicken or the egg?
The first lender in this Sacramento short sale doesn’t want to issue approval until the second lender issues its approval letter. Of course, the second lender doesn’t want to issue its approval letter until the first lender issues its approval letter. And we can go around and around and around until we’re blue in the face, but nobody is gonna budge. They’ve got their positions staked out, and by golly, they’re not moving.
In California, I have to side with the first lender. Because it makes the most sense for the first lender to be reluctant, and I’ll tell you why in a minute. But first, let’s look at the second lender. The second lender is in a position of jack squat. The second lender, especially if it’s a purchase money loan, will get wiped out in a foreclosure and end up with nothing. It is in no position to negotiate. The only position it has is to disqualify the short sale and stop the short sale from going through, but that’s like cutting off your nose to spit your face. It’s just plain stupid. The second lender stands to receive funds, generously donated, I should point out, by the first lender. Otherwise, it would get nothing.
The first lender gives up certain rights upon short sale approval that the second lender does not. Those rights involve dual tracking. It’s the only part of the so-called dual tracking law that affects a short sale, unless you want to wait until 2018 when the law really takes affect. It says that when a lender issues a short sale approval letter, the lender must stop all foreclosure action and the lender can’t move forward on a Notice of Default or even file a Notice of Default. So, give the first lender a break. Issue the approval letter.
Sometimes, the only thing you can do if the banks won’t see reason is to hope the second lender elects to sell the note to somebody else so you can start over with a new lender. In fact, maybe you want to give them a list of lenders who buy these pretty much worthless scraps of paper — these no-equity seconds? Of course, this is presuming the second lender didn’t buy MI, which is another story for another day.
Two Loans on a Sacramento Short Sale
One of the reasons I write a daily blog is to educate and share my real estate knowledge with other people, and I hope it’s entertaining along the way. My secret to being so successful at blogging is that I write about what I know; I don’t write about what I don’t know. I might not know how to keep a souffle from falling or a yogurt from curdling so I don’t write about cooking, but I do know how to negotiate and close a Sacramento short sale.
As such, I recognize those who do not. It’s like a secret club in Sacramento. Nobody wants to admit that they don’t really know much about short sales, but most agents rarely deal with a short sale. I wish they would just tell me they need help, and I’d gladly help them, but some of them don’t want anybody to know. It’s like a badge of shame or something, which is ridiculous. While I can understand that reluctance, they’re not doing anybody any favors.
For example, an agent who doesn’t know much about short sales might tell their buyer that the buyer should not write an offer on a short sale with two loans. The agent might erroneously believe that it won’t close or the odds are it will be more difficult, which isn’t necessarily true. Two loans on a short sale provide less excitement than, say, a Bank of America FHA short sale or certain lender’s HAFA short sales or even a Fannie Mae short sale. Sometimes the two loans are held by the same institution, in which case even if the second loan was hard money that loan is probably exempt from recourse in California, so the lenders are more likely to cooperate.
I just closed a short sale recently that had a loan for almost $500,000 and that bank accepted a $6,000 pay off from the first lender. Don’t let the fact that there are two loans on a short sale frighten you away. Of course, there is one exception that could cause difficulty, although I haven’t yet encountered it, but I see it out there on the horizon. That is when the first lender refuses to issue an approval until the second lender issues its approval, and the second lender refuses to issue its approval until the first lender issues its approval. Yeah, it’s a Catch 22, and I did not much care for the book, either. One bank eventually caves in.
The reason a first lender might not want to issue an approval letter is because of the new law that went into effect on January 1 of this year which says after an approval letter is issued, the lender must stop foreclosure: The Homeowner Bill of Rights. It’s the only way to stop dual tracking. But I have ways to work around it, so if you’re looking for an experienced Sacramento short sale agent, make sure you call an agent like me who has closed hundreds of short sales. Don’t draw the short straw when it comes to your very own short sale agent.
A guy told me yesterday he had been talking with his property management company about doing a short sale. The property management company admitted that it does not sell real estate, it only manages rentals, but offered to do the short sale for him. What? How insane is that? It’s bad enough to give your listing to an agent who doesn’t sell real estate, but give it to an agent who doesn’t do short sales? Why don’t you just cut off your head now and leave it rolling in the street?
The Point of Contact in the Real Estate Business
One of the little perks given to homeowners in distress through the California Homeowner Bill of Rights, apart from restrictions on dual tracking, is the right to a single point of contact, what we refer to as the POC. That acronym stands for Punch on Chin. No, it doesn’t, it means Point of Contact; you just feel like punching them. It’s nothing to really get excited about because the POC is often pretty useless. It is a person assigned by the bank to answer the phone when a customer calls. I don’t know if that person physically works at the bank in person or lives in Canada but by golly, it’s a live person you can talk to each and every time you call, even if that person is worthless and no help to you whatsoever.
There are no provisions in the new law that says the POC needs to be knowledgable or carry any authority. The POC doesn’t process your file; the POC accesses a computer database where supposedly notes are stored to glean information. As a Sacramento short sale agent who has worked with hundreds of bank negotiators over the years, I can tell you that much of the data that is not always entered correctly. But by George, you’ve got a live person on the phone. That’s a remarkable feat.
More than half of the time, the information the POC gives to a customer of the bank is incomplete or incorrect. I know this because my client will call to say the POC told her, for example, that the hardship letter is not in the file. Not only is the hardship letter in the file, but it’s at Fannie Mae for review. Along with all of the other docs such as the bank statements and tax returns the POC also says are missing. That’s because I am talking to the person who is processing the file. I am speaking to the short sale bank negotiator while the seller is talking to a POC — a POC who would dig through her bag to find an unwrapped Tootsie Roll pop and plop the thing in her mouth without washing it off.
I had a bank offer me a credit card a while back that would cost me $100 a year. At first blush, I rejected the idea because I am not that interested in accumulating points or cash-back bonuses as I always pay my bills in full and never carry a balance. However, the icing on the cake offered by the bank was not really the cash-back bonuses. It was the fact that I could talk to a real live person who would answer the phone through a direct phone number. That is now a luxury today! To be able to call a person directly and have said person answer the phone without punching through a menu or sitting on hold or talking to other doofuses.
There is little more frustrating than screaming Operator at a recorded message and hearing the reply: Did you say: Call Back Later?
The personal touch is missing from so much in business today. You can’t talk to anybody anymore. I was looking for a small business to help me over the weekend, and I was searching online. Most of the websites were geared to the company and not an individual. I don’t want to do business with a company. People do business with other people. That’s why my website features me because that’s what people want. My website is more than a search engine for homes in Sacramento. And I answer my phone. If you need a sharp real estate agent in the Sacramento area, you can call Elizabeth Weintraub 916-233-6759, and THAT, I promise, will make you happy.
What’s Wrong With the California Homeowner Bill of Rights
How will the California Homeowner Bill of Rights affect short sale sellers in Sacramento? Despite all of the hoopla over it, not much. Probably the most important aspect of the Bill of Rights as it relates to short sales is the stopping of dual tracking — but that only goes into place after short sale approval, not prior to short sale approval, which is when a homeowner needs it.
Dual tracking happens when a foreclosure has been initiated. This means a Notice of Default has been filed in the public records despite a homeowner’s good faith effort to find a solution. Here’s the way it works before and after the California Homeowner Bill of Rights:
- Homeowner falls behind and stops making mortgage payments.
- Homeowner pursues a short sale.
- Lender files for foreclosure.
- Trustee’s Auction date is set.
- Despite a pending offer for a short sale, home can go to foreclosure.
I can only begin to imagine the trepidation felt by homeowners facing an impending trustee’s auction. The problem is most banks will refuse to review a request to postpone a trustee’s auction until the auction date is 3 to 7 days away. It’s not as simple as asking the bank to permanently stop foreclosure action. Certainly not a month or more in advance. Nope, the banks make homeowners chew on their fingernails wondering if the homeowners will be tossed into the street almost all the way to the 11th hour. It’s as though they get some kind of perverse pleasure out of this type of torture. Why can’t a bank postpone a trustee’s auction when it’s 30 or 60 days away? Why make homeowners wait?
One of the services I provide as a Sacramento short sale agent is requesting the postponement of a trustee’s auction. This service, far as I am concerned, falls outside of the scope of selling real estate and dangles dangerously into the realm of practicing law. Sometimes I can’t sleep at night, worrying if a sale will get postponed. A bank is not required to postpone an auction. In fact, if the investor for that loan is Fannie Mae, you can bet your bottom dollar the auction won’t get postponed. That’s why some short sale agents refuse to work on Fannie Mae short sales.
If the California legislature really wanted to pass a Homeowner Bill of Rights, they’d stop dual tracking after a short sale is initiated and verified. Not after short sale approval. Because after the short sale is approved, there is little reason for the bank to initiate a Notice of Default.
