You can't be serious

Scottsdale, Ariz.-based Realtor Shelly Peterson called me to say she had a good laugh about Countrywide Financial Corp.'s new foreclosure prevention initiative with ACORN (see Inman New story).

It's not that Peterson thinks there's anything funny about foreclosures. She's trying to help a number of clients avoid foreclosure through short sales. While other lenders have been able to take advantage of such offers when they pencil out, Countrywide has proven very difficult to work with, she says.

"I currently work with about 10 banks, and they've streamlined their process very effectively and get them closed up and I am getting (short sale) approvals," Peterson said. "But Countrywide is the worst I've ever seen. In fact, they are so bad the agents here find out the homeowner has (a loan serviced by Countrywide) and they won't even bother listing it to try to keep it out of foreclosure (through a short sale), because Countrywide never gets off the base and does anything."

Click "continue reading" to hear more about Peterson's experience, and let us know how your attempts to negotiate short sales with Countrywide and other loan servicers have gone (and see the complete version of the Tom Tomorrow cartoon excerpted above here).

In one instance, Peterson convinced Bank of America, the holder of a second mortgage, to sign off on a short sale that would have left BofA in the lurch but created a near break even situation for Countrywide. But Countrywide, which had originated the mortgage and is now servicing it on behalf of Wells Fargo, rejected that offer and hasn't responded to another, she said.

Instead of assigning the file to a single person who knows its history, each time Peterson calls Countrywide she has to start from the beginning and do all the verifications with the whoever answers the phone. "Nobody on the other end of the phone knows what do do" without being told by a computer program, she said.

To make a long story short, since Peterson opened the file in October, Countrywide has missed its opportunities to cut its losses on a loan on a home that's in an area officially designated by Fannie Mae as a "declining market." The seller's got cold feet because she called the Countrywide loan officer who originated the loan for advice and was informed she'd probably be better off letting the property go into foreclosure.

Having been in the business for 29 years -- including a stint as a mortgage banker with Citibank -- Peterson said she's never seen anything like the current downturn, including the Savings & Loan crisis. Clients are abandoning homes before they are foreclosed on so they can at least lease a home before it shows up on their credit history, she said.

"There's a band of us that's surviving through this turmoil that says it's just a total waste of time" dealing with Countrywide, Peterson said. "Bear Stearns has it down, Chase has it down, but Countrywide is just a joke."

The reality is that short sales don't appear to be a big part of Countrywide or other loan servicers' foreclosure prevention strategies. Instead, they're focused on repayment plans, loan modifications such as interest rate freezes, and refinancing.

Some members of the HOPE NOW coalition of loan servicers reported in a recent survey that in the second half of 2007, they initiated repayment plans or modified the loan terms of two out of three delinquent subprime borrowers (see story).

But the State Foreclosure Prevention Working Group recently published results of a survey taken back in October that suggested a gloomier outlook. Loan servicers, that survey found, weren't even attempting to help seven out of 10 seriously delinquent borrowers.

Most of the 205,000 successful loss mitigation outcomes for the month -- 73 percent -- involved borrowers bringing their accounts current on their own. Short sales and deed in lieu of foreclosure agreements accounted for less than 2 percent of loss mitigation outcomes.

Mitigation outcomes -- October 2007

                                                                                                                                                                                                                                                                            

Outcome	Number	Percent total
Deed in lieu	356	0.17 percent
Short sale	3,456	1.68 percent
Forbearance	3,129	1.52 percent
Repayment plan	20,486	9.98 percent
Modification	19,082	9.3 percent
Refinance	8,242	4.02 percent
Reinstatement/Account made current	150,519	73.33 percent
Total	205,270	100 percent

Source: State Foreclosure Prevention Workgroup

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