Greedy Banks and Short Sales
Since 2006 when I processed my first short sale, there have been major advances in the short sale industry. Lenders didn’t even have a short sale department. Countrywide was my first short sale and they only had what was called a “work out” department and it took days for someone at the lender to discover that the department even existed.
Thankfully we have come a long way, lenders now have systems and forms and departments to help facilitate the process. But one thing still remains, the public perception of the “Greedy Banks”. Now don’t think for a minute I am trying to defend the lenders, but I would like to help clarify the need for greed.
Think of it this way, if you’ve ever rented an home or apartment and can picture it in terms of a property manager. You pay the property manager your monthly rent, they don’t own the home, but they collect a small monthly fee and give the rest the homeowner. Should issues occur, they take care of the service needs. If something major happens, you don’t pay rent, then the property manager will contact the owner and see how they would like them to handle the situation.
Your loan on your mortgage is basically the same way. However the “owner” is called the “investor” this is the person or entity who actually gave you the money to purchase the home from the original seller. Your lender, who you pay the payments to is called the “servicer.”
Now some of you may be thinking, I pay my payments to the actual owner of the home when I rented. Well in a VERY small percentage of loans, this may be the case as well. That would mean that you have a “portfolio loan.” This means that Bank of America actually gave you their money to purchase a home and you are paying Bank of America monthly payments because they are servicing the loan too.
The banks, service loans for over 10,000 investors. Seriously, I have had a short sale with Wells Fargo as the servicer and the investor was Bank of America. You could be paying your monthly payments to Chase and Fannie Mae is the investor on your loan.
So why does this all matter? Well, in most cases it isn’t “Greedy Banks,” they are just following the guidelines of the investor. The investor dealt out $300,000 in 2005 so someone could purchase a home and now that home is only worth $175,000. They look at the seller and see money in accounts and ask for a contribution. Often times this is where I hear the “Greedy Bank” comment. Most cases it is not the lender asking, it is the actual person who is taking the loss on their investment. Just like the homeowner took a loss, maybe with things they put into the property, and wanting to take the $2,000 chandelier in the dinning room. The investor is taking a loss and is trying to recover as much of their money as possible too.
I do think that borrowers tend to forget that there was an actual person that loaned them the full amount to purchase their home. Although there is no emotional loss, there is still a monetary loss they are trying to recover.
Tags: Short Sales
