Posted by: Catherine | February 9, 2010

Should you walk away from your mortgage?

Many people are walking away from their homes, their mortgages and some have given it a name:  Strategic Default.

I’ve had conversations with clients about this very subject when, in some cases, they’ve tried for a year or more to get their loan modified, their interest rate reduced, their principal reduced or some other relief.  Often, it is due to a reason such as job loss, loss of income as companies restructure and downsize, loss of a spouse, or a move for a job.  There are many hardships, but in the case I’m talking about today, I’m talking about walking away, starting over, all in an overall strategy of mitigating your losses.

In a quote from a recent CBS 5 article“He says more Americans should be walking away from their homes in droves.

“The problem is we have a double standard,” White said. “The people on main street feel we have an obligation feel to keep our promises. But the people on Wall Street want to maximize promises, and minimize losses.”

Take Morgan Stanley. They gave up on five buildings in San Francisco’s Financial District; buildings reportedly worth half what Morgan Stanley paid in 2007.

“If someone wants to hang on because they think they have a moral obligation to pay their mortgage, that’s fine. But the person on the other end of the transaction, the bank is not operating according to the same norms and the bank would walk in a New York second from an underwater house,” White said.”

The California Bankers Association is quoted, in part, as saying: “During the past few years as foreclosures have increased we have seen historic efforts by the government, financial services industry and consumer groups to help millions of borrowers stay in their homes.”

Could this be true?  Historic efforts?  Really?  Because I’ve worked with, completed short sales for, or consulted with over 100 homeowners in the last year.  I can count ONE homeowner who obtained acceptable relief from their bank.  ONE.  I think maybe it’s been a historic PR effort, because in my world, I don’t see any effort helping anyone.  I’ve sold homes for people who cried through the paperwork because they didn’t want to sell.  Many have used terms such as “kicked in the teeth,”  “ignored,”  “given the run around,” “disrespected,” and other things involving bad words I won’t repeat  – when referring to their efforts with their banks.  The biggest ones are the worst offenders.  

Anyway, enough about this, anyone reading this probably already knows of the lack of help for homeowners out there.  Working on short sales every day also gives me a unique perspective as to what is important to these banks.  And it is NOTHING but their own bottom line. Period.  They will let a home foreclose because they won’t pay back HOA dues.  Or that a client couldn’t bring money to the table to close, or because they wanted to have clients waive their deficiency protections and sign “their life away” allowing any deficiency to be a new collectable debt.  

No one seems to be listening.  I’ve written letters to law makers, to the banks, and to the CEO’s themselves. I have to say, that though Chase has got one of the worst short sale systems out there, their CEO Jamie Dimon does have his staff respond to problems.  I have a letter thanking me for my contact of Mr. Dimon’s office.  And yes, they did resolve the issue and the deal closed.  I may just frame it.  However, it’s deals like that feel almost like an empty “victory.”  Yes, it closed.  But this was a deal in their system for 8 months.  The son was selling a condo in a retirement community in Walnut Creek he shared on title with his mother.  She passed away.  He was left dealing with the hell on earth that is the Chase short sale system. 8 months.   And , that is not even a record with Chase.  Some have taken even longer.  And, it’s not just Chase. It’s most of them.  So , as a consumer, you try to do the right thing, you are ignored, kicked in the teeth and /or disrespected.  Just how long are you going to keep trying?  Walking away doesn’t seem so bad anymore. 

The whole situation is sad.  The banks are inundated.  They have no real mechanism to dealing with these short sales in a timely manner, and it is the borrowers and the buyers caught in the middle.  Buyers trying desperately to beat the tax credit deadline.  Borrowers trying to “do the right thing” while trying to protect their families and future at the same time.  

Hopefully as the months go on, short sales will get better.  The new OPTIONAL guidelines may be adopted by some of the big lenders.  Wells Fargo is rolling out a new short sale program modeled a little more closely to the VERY successful Wachovia short sale program.  Bank of America and Chase, just have a long way to go.  Even CitiMortgage I’ve had approvals within 45 days. GMAC, a month. EMC, same.   Why these banks don’t start treating these short sales more like an REO, is beyond me.  Let us submit the listing agreement when we get it.  Have the bank order the BPO or valuation/appraisal then.  Tell us NOW what you’ll accept.  Let us market at that price.  We’ll submit the highest and best, and you approve it.  Done.  Now, was that so hard?  Give the servicers protections against their investors  – they are trying to following investor guidelines that are bogging down the system and our economy. It’s time for a change.

If Obama was hiring for the Secretary of Short Sales – I’d apply.  There’s got to be a better way.

 These are my own opinions . . .

Catherine Myers
Windermere Bay Area Properties

Walnut Creek, Concord, Clayton, Pleasant Hill, Martinez, Pittsburg, Antioch, Brentwood and surrounding communities.  Short sales and resources to avoid foreclosure.  925-683-2125 – Contra Costa , Walnut Creek real estate, short sales, foreclosures, REO.  Call for a free consultation.


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