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Banks must show 'financial responsibility'

Letter to the Editor

By Inman News, Thursday, December 18, 2008.

Inman News

Re: 'Worries amid foreclosure wave' (Dec. 17)

Dear Editor:

As a rule, the condition of bank-owned properties is a direct reflection of the hostile communications or lack of communications between the previous owner and the collection wing of the lender. Some owners have left their properties stripped of toilets, sinks, tubs, cabinets, stoves, dishwashers, etc. Do you get the picture? Other owners have turned the water on just prior to leaving without informing anyone. Anybody want to play the "smell for mold" game? This is where the winner actually loses. What further aggravates the bank's relationship is when the lender does not process a seller facing a "short sale."

I have had experiences in my own listing of short sales where the lender would apparently rather refuse approval of the short sale than try to make the best of an already symptomatic problem. I have seen a property in short-sale status for $229,000 receive little bank attention, and the bank ended up selling the property as real-estate owned (REO) for $163,000 -- a true loss of $66,000.

Am I in favor of the government bailing out the banking industry? Not until (banks) show financial responsibility. The manner in which most banks -- not all -- treat property owners about to lose their homes is despicable. There are a few good lenders I have had favorable communications with.

Buyers: Make sure the foreclosed property you are buying is fully inspected, and I encourage all parties to have the property inspected for mold. There should be a government regulation that all REO lenders, before selling the property, be required to present the buyer with a mold-free certification document. Without this, families and especially children are at grave risk.

The bottom line is: Banks need to be accountable. They need to manage their businesses to survive and be profitable, accordingly. Institutions need to fail when they are managed to fail. I am opposed to bailout programs for all situations, (and in favor of) competition and capitalism.

Steven Schultz
Broker/salesperson
Windermere.com

Copyright 2008 Inman News

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Submitted by on December 18, 2008 - 4:10am.

Bill Fooks
TFT realty Marketing Service
Warwick, RI http://www.fooksteam.com
Hi Steve.
Good observations. Yes, let the market work. The same banks that made all these foolish loans are now blaming the brokers so why listen to your sensible offers.They don't want to take responsibility, they want to blame and then they want a handout. If only I could work that way I would never fail in my eyes. This does not teach them to be good stewards of their resposibility if they are not allowed to fail. Now they must suffer the consiquences of this foolishness. They are not being allowed to fail. Where is the free market in this??

 
Submitted by on December 18, 2008 - 5:00am.

Once the banks admit that they don't know how to sell real estate, perhaps they will begin to act in responsible and timely manners when it comes to loss mitigation.

So far, they haven't a clue.

But, the foreclosures on the market are leading the sales in my area, condition or not, buyers who intend to occupy for some years are getting the best buys in 6 years.

Lenn Harley
Broker
Homefinders.com
http://www.homefinders.com
Serving home buyers in MD and Northern Virginia

 
Submitted by Emmanuel Scanlan on December 18, 2008 - 5:28am.

Hello Steve,

Yes, the banks do need to show and assume financial responsibility. And yes as a Professional Inspector I also feel that banks themselves should have a full set of inspections performed on a home before they list it. However, our own government has failed to properly regulate banks to force them to perform properly. I am not a believer that the government should heavily regulate business' but some basic regulation is needed.

Ultimately the banks are responsible, or should be, but basic regulation is lacking that has severely aggravated the issues currently at hand. For example, the banks you hold in high esteem quite possibly actually own the loan. As such they realize it is better to do what they can to short sell the property rather than have it sit as an expense on their books.

The banks you do not hold in esteem more than likely do not even own the loan. They may have packaged it in one of the many derivative securities and sold it off and are just servicing the loan. There are the mortgages that have caused a great deal of problems and are simply huge in numbers. The banks servicing these generally have to go back to the owners of the securities and obtain their approvals for foreclosures, short sales, etc. The securities owners are the ones forcing the repossessions and refusals to short sell on these mortgages. Our own government failed to regulate this area, knew it was occurring and allowed it to happen.

The second failure of regulation is that banks are not required to comply with disclosure laws on repossessed properties. They repossess the home and sell it "As Is" and many times refuse to even turn on utilities for a proper inspection. Many buyers still go through with the purchase and take their chances. Since the utilities are not on many times they do not want to pay for an inspection thinking they can learn nothing from it that they can not already see. Many of those same buyers do get burned later with the issues you described.

Lately it appears that the banks actually holding the mortgages (not sold off as derivatives) are doing whatever they can to sell the home. I am seeing time and again where they rush to turn on utilities, repair problems found during inspections and actually reduce sales prices as a result of inspection results instead of affecting repairs.

It is unfortunate that the entire mess is occurring and that banks have to be regulated into taking a responsible stance. Possibly soon, with the foreclosure numbers climbing, banks and the owners of the derivatives will fall in line and show the responsibility to help alleviate this current crisis.

Emmanuel Scanlan
PS Inspection & Property Services LLC
www.psinspection.com

Knowledge is power, but sharing knowledge brings peace!

 
Submitted by Peter J. Pike on December 18, 2008 - 11:37am.

Unfortunately, my experiences with loss mitigation departments have been the same as Mr. Schultz's. The losses that I have seen, by banks dragging their feet, relying upon poorly done appraisals and BPO's, and by making unrealistic demands, just demonstrates that most "big name" lenders have no clue as to how to run their businesses. BTW, for any brokers out there that are preparing BPOs: the banks are not looking for you to tell them the highest price that they can expect for a property, they just need to justify the price that is being offered. I spoke with one agent who told me "I am working for the bank, that means that I have to tell them the highest price I think that the property is worth"!

Another issue that constantly seems to come up, in the attempt to quantify the "value" of a particular house, is the refusal of appraisers to look at similar properties on the market, the length of time they have been on the market and the prices at which they are listed. Looking only at recent sales does not give the entire picture in this market. When a property has been on the market for over a year, with the price being lowered every few weeks, and only one offer is made, it is probably close to the real "value" of the property!

Oh, and if anyone knows of a way to get answers from Wachovia, Countrywide, Chase, BofA, Wells Fargo (you get the idea - the banks with the most losses) in a timely manner - please, let me know! We call them all, every day, and still, cannot get much information, and get our files closed, because we did not foresee that their requirements would change mid-way through the process, and get them the updated information! ARGHHHH!

Peter J. Pike, Esq.
McNeese Title, LLC
Destin, Florida

 
Submitted by Adrian Miller on December 19, 2008 - 1:41pm.

Same results here. You would think they would be a little more cooperative so inventory can be moved in a timely manner. This aggravates buyers and some just walk away. I agree there should be some regulations to this.
Also why are the banks so reluctant to have more than a few agents handling the REO properties. There is no one one agent can handle 100 properties effectively! With some so spread out around over different counties there is no wonder that I don't even get answers on inquiries. The banks have a major hand in what's going on today and it only begins with the loans that are going into foreclosure.

Adrian Miller, Realtor
Realty World-Viking Realty
Fremont, CA

 
Submitted by Ned Carey on December 23, 2008 - 2:35pm.

The problem with banks is they are box checkers.

If something unexpected happens their checklist doesn't handle that situation. The employees can't, or are sometimes not allowed, to think for themselves.

Ned Carey
http://baltimorerealestateinvestingblog.com/

 
Submitted by Anton D. Stetner on December 27, 2008 - 8:56am.

I agree with everything that has been said here. My experience has been that these banks are relying on information from BPOs they under paid for, they are uncooperative, the loss mitagators are under paid and overloaded with files, they reject fully reasonable offers and then they just end up selling the home for less money.

Anton D. Stetner
Real Estate Solutions Group
Snohomish County Washington Real Estate

 
Submitted by Todd Covington on January 4, 2009 - 10:44am.

Yes, I do think the banks bear some of the responsibility for today's economic problems but be sure that they are only a small part. Overspending by Americans is totally out of control. Americans have NO idea how to save. Pass a law where a 5% down payment is required for all home purchases and teach Americans how to save again. Bailouts are no more than teaching us that we are not responsible. Let the market fix itself and we can learn a valuable lesson which could help for years.

Beaufort South Carolina Real Estate
Spring Island Real Estate
Fripp Island Real Estate