LOAN MODIFICATION, AN EXPRESS-ROUTE TO FORECLOSURE

This is a situation that is unfolding at the present time. I am passing it on so that others do not fall prey to the stupidity.

I listed a home as a short sale after the lien holder had recorded the Notice of Default and Notice of Trustee Sale. The seller had already made an unsuccessful attempted to obtain a loan modification with Wells Fargo. Time was short, so I priced the home aggressively at $ 340,000.

There was a flurry of activity and we had six offers in the first week, including offers over $ 400,000. I submitted the highest netting offer to Wells Fargo and they sent an appraiser to do the BPO. The appraiser told me that it would take a week to get the BPO into the lien holder. At that point we were firing on all eight cylinders.

Two days after the BPO got to Wells Fargo my seller got a call from them advising that he still might be able to get a loan modification, but that he could not pursue the loan mod and short sale at the same time. Naturally, he selected the loan modification. Wells Fargo postponed the trustee sale and our short sale process came to a screeching halt.

The loan mod dance went on for weeks. The buyer with the highest netting offer got tired of waiting and pulled the plug. I put the listing back into Active Short Sale status and the calls and showings started up again.

Last week my seller got a call from an agent, out of the blue, advising them that Wells Fargo had already foreclosed and that they were going to have to move out. He has yet to receive any documentation from Wells Fargo since the Notice of Trustee Sale on July 2^nd.

Apparently, the loan modification department and the department that handles the foreclosures don’t bother to talk to each other unless it is convenient for them to do so.

When they got the agent’s call there was no record of the foreclosure in the county records, but of course, with the county staff reductions they are behind in their updating process.

My seller called Wells Fargo to find out what was going on and they told him that there were no records of his communicating with them for several weeks. He only has cell phone and land-line phone records proving the existence of his calls.

It is not a coincidence that when my seller made the decision to pursue the short sale the information went through the Wells Fargo system at the speed of light. However, when it was not convenient for them to admit their stupidity, they have no record.

Yesterday I got a call from my title rep advising that indications are that Wells Fargo now owns the property and that they paid $ 375,000 at the trustee sale! I will not be able to get confirmation until Tuesday.

This is another BRILLIANT move by a lending institution that has received millions of dollars of our (TARP) tax money. Had they not interfered with our short sale process they would have netted considerably more. They spend between $ 40,000 - $ 60,000 to complete the foreclosure that was not necessary, and ignored an offer for more than $ 400,000!

Now they are going to have to get an offer for over $ 450,000 to match what we had going: not a likely prospect. Of course, we do not know how much they may gain from our government--FDIC guarantees and the like.

The important lesson is that once they file a Notice of Trustee Sale, the lien holder can drop the dime on your seller at any time that suites their fancy. To them, business is business, no matter how POOR the business decision happens to be.

The only thing that is vaguely fair about this incident is that Wells Fargo is going to take a bigger financial hit than was necessary.

Pass the word to other agents and sellers so that they do not fall into a similar trap!