Brad & Traci Brusenhan

Note to Self...

Multiple lien short sale transactions have become increasingly difficult to close over the past few months. As a result, our company has stopped accepting new cases until conditions improve. The majority of our listing volume was tied up in 2 lien short sale properties when the first portion of the bailout money was distributed. Following the announcement of the Homeowner Affordability & Stability Program (HASP) and the earliest infusion of a few hundred Billion dollars, the banks began to behave irrationally. It just wasn't making any sense. Our success ratio for closing two lien transactions has plummeted in 2009.

Politicians and mortgage executives claim they want to help homeowners keep their home whenever possible. Instead, the bailout cash has served to buy time and options for the banks. Of course they also plugged some holes in their books that no bank official or politician is willing to disclose publicly. One of the options many banks are exercising is the option to take the tax payer bailout cash and also take the home through foreclose. Second lien holders are charging off the debt and ignoring late stage loans. First lien holders are killing deals they would have closed in a heartbeat only a few months earlier.

Over the past few years, I have earned a living closing short sale homes in Dallas, TX. Since the spring of 2007 when 580 mid-score approvals disappeared, I have focused almost entirely on helping homeowners avoid foreclosure. I recognized the writing on the wall early because I had been looking for it for a few years. Looking back now I realize I had no concept of the enormity of this issue and therefore I underestimated the impact by a long shot.

If you are holding a book of 2 lien short sale listings that are sucking the life out of you and your business, with little to no return, consider sending a message to the banks by following these 3 steps:

I realize you may have a chance to close the home and help the homeowner. If you are willing to take it on, God bless you for the effort. We have done so more times than I can recall. I have fought to the ends of the earth, it seems, to close files that others would have long since abandoned. However, when both banks agree on the Broker's Price Opinion (BPO) but still choose to disagree on the amount being paid to the 2nd, we are stuck between a rock and a hard place. By this time, you may have invested hundreds of dollars and untold hours to advance the process to the negotiation stage.

First lien banks have even told us that we could not negotiate for more money from the buyer to pay the 2nd in order to make up the difference from what they were willing to pay them. This is, of course, after the 1st bank has sent us an approval letter stating a required net that we have been attempting to pay them. They claim any additional money to the contract requires a new approval, a new delay (weeks in some cases) and is still not likely to be approved for the extra contribution to be given to the 2nd. When I have tested them on this issue, expecting to call a bluff, they have proven they were perfectly willing to allow the home to go to auction, more than once.

I sincerely hope the process will be more standardized like the FHA program soon. Until then, we have pulled out of the 2 liens/banks short sale game entirely. We are happy to work single bank properties and enjoy FHA loans in particular. We hope to return to our past policy of working with all types of loan scenarios sometime soon. It is not a matter of being unwilling to help. It's a matter of taking measures to avoid going broke in return for the effort...

In the near future I will post a few jaw dropping case studies to demonstrate some of the insanity we have been dealing with. I may even post an audio recording from one of our loss mitigation negotiations in order to illustrate my point. I have gathered an extensive collection. Of course the truly priceless conversations always seem occur when recording is not possible. If I do post one, I will obviously edit out the parts that would invite nasty demand letters from bank attorneys. In any case, be sure to subscribe to our feed if you would like to receive the details.

I watched a news report last night which stated that our Plano, TX school district is cutting programs. With foreclosures and declining property values in the N. Dallas area, the reduced property tax income is clearly affecting the ability for our schools to continue providing the same services they have in the past. It will not be long before a tax increase is proposed to capture the additional funds needed. The schools will eventually get the money they need.

The quote below seems to sum up our current economic dilemma rather well. Our new President will sign a basically worthless stimulus bill today which will take us decades to recover from. We are going to give him about a trillion dollars with no accountability other than it possibly costing him a 2nd term. It just doesn't look pretty.

I believe any person can achieve almost anything. I do still believe in the American dream. I just think it is about to be much more difficult to achieve from scratch. Only the most determined and smartest will be able to build and achieve in this new environment. Many of the folks that were able to scrape by in the past will be forced to give up.

"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it." ~~ The late Dr. Adrian Roger

What do you think?

posted by: Brad Brusenhan
Brusenhan & Associates Realty
www.DFWRealEstate.info

I received this email from a Google Group that I subscribe to:

A reporter with the New York Times is looking for people who received a loan modification but end up back in default because the new rate wasn't workable for them either. Maybe it was higher than the original; maybe it ballooned. Anybody seeing clients like that? trying to speak with people early next week. Thanks.

I will post a link to this blog in the other one. If you have a story they may be interested in, please reply to this post.

I fought this battle yesterday. We are 3 weeks from auction on my clients home in the Dallas, Texas area. I have an offer in to Wachovia. My client had stated from the beginning that his goal was to find a way, any way, to keep the home but agreed that having the option for a short sale in place sounded like a smart back up plan. I am thankful that he agreed to that even though he didn't fully understand what I was preparing for. His PMI company called me yesterday and told me he was pre-qualified for the workout program. I asked the obvious question. How on earth is it that he qualifies? They said it was because his wife is collecting 916 a month disability. I pointed out that this was currently their only source of income and that even if he takes his social security early, that is still only a $1,800 a month combined total income and because the husband has Parkinson's disease he is very limited in the jobs he could take. In addition, if he earns more than $900 a month he loses 50 cents on the dollar of every penny he earns.

Over time, I had been helping the owner understand that it doesn't matter what I am able to get the bank to agree to. At the end of the day, there is no way that he will be able to afford the mortgage on this property for any length of time, even after a modification. Over time, I helped him to understand that even if they ultimately approve him to roll in all the back delinquency and drop the rate a point or two for a few years, this is still a very serious problem. I explained that because they are on a fixed income, they need to fix their expenses as well. If he were to take social security early and also get a job earning the maximum he can under the social security plan, he may have an extra $200 over the minimum needed according to the financial information gathered when we began the process. At first he was not convinced. He said it looked to him like that would solve the problem. With that being said, I continued to work to help him obtain the loan modification even though I disagreed with his assessment.

Last week I asked if they thought that workout sheet accurately reflected his expenses. He stated that he listed all of his bills. I acknowledged that he was correct. I then pointed out that while it did reflect all of his bills, it did not reflect all of his expenses. I asked him where he had listed a budget for even modest birthday gifts for his grandchildren. Where is the Christmas budget? Where does it list the money required to have the grandchildren spend the weekend with Grandma and Grandpa. Even though he couldn't afford to take them out to the movies, Blockbuster videos and pizza cost money too. He seemed to believe the extra $200 would cover it. I told him that it would for a short time, but not for the long haul. He asked me to explain.

I delicately pointed out that he has known how important getting a job is, but he still hadn't secured one that will even pay him the $900 a month we discussed. We both know he is capable of getting a job that will accommodate his disability for a time. However his disease will progress. What if he gets the job tomorrow, but in 60 or 90 days, he is unable to handle the work? I also pointed out that owning a home is still a variable expense. What if a hail storm passes over his part of town this spring and he has to pay the deductible on a new roof? What if the HVAC or water heater goes out? What if he or his wife has to add a new prescription to the mix? What if the transmission goes out?

The facts are this. IF he takes the early social security and IF he gets a job for $900 a month, he is only left with $200. Due to their situation, he doesn't realistically have an opportunity to even earn more money even if his disease allowed him to truly enter the workforce again. In addition to his disease, he also has to be around to care for his wife because her disease is much worse than his and she needs him there to help her. Regardless, until he satisfies those big IFs, he is currently $1,600 below the bare minimum needed to keep the lights on and $1,800 below the $200 cushion he is banking on. Even if the bank chooses to let this ride, it is still a road to nowhere.

He believes that owning a home is wise investment. Unfortunately, his home is currently worth $20,000 less than he owns. Equity doesn't exist without a sale either, so add another $10,000 in closing costs on top of that and he is starting this so called investment $30,000 in the hole. It will probably be years before there is a dime of equity. What he has right now is a "Get Out of Jail Free" card with the short sale that is lined up and waiting on approval.

It was at this point that the stars aligned and angels sang and he UNDERSTOOD that it was time to do the only thing that actually made any sense. He finally acknowledged that the picture I was painting for him was as true as the day is long. He said he didn't care what the bank offered with regards to a work out solution, he was ready to get out from under the mortgage while the getting was good.

He didn't come to this conclusion by accident. I had to slowly incorporate it into our discussions over the period of a month before he got it. He thought I was wasting my time when I put it up for short sale in the MLS. I had already reviewed his financials and was perfectly aware of where this would end up from the beginning. In the beginning, he was not ready to acknowledge what I believe this very intelligent man already knew was true in this heart. I had to do things that he approved for legal purposes, but didn't quite understand. I had to hold back on the details he was not ready to accept and let him do some research and soul searching. I had to unfold the story over time, delivering each new tidbit of information only when it was the right time for him to receive it.

The sad part of this story is that my client is a very intelligent man. In his career, he was successful business man and presentation trainer. The sad part is that his pursuit of a loan modification that did not make sense was never really the issue at hand. The issue was that he was faced with something that his pride was not ready to accept. I don’t say that in a condescending way. I say it in a loving way. What a difficult and tragic season to go through. Regardless of the housing market, the economy or the unique time in history, we will all go through this someday. I had to help lead this kind gentleman down one of the most difficult paths of life. That path that Sawyer Brown sang about in the song titled "The Walk". I had to gently help him step into a new reality, a hard reality. I had to help him say out loud that he could no longer be that bread winning head of the family that his wife and now grown children have always look up to and come to with their issues of the day. I can assure you that it was not easy for me either.

At the time we met, he did not know me well enough to trust me at the level he was asked to. He didn't know that I truly did have his best interest at heart. He didn't know for certain that I was actually prepared to spend my time and money helping him to stay in the home, even if only for a short period of time. He did know that it would actually cost me money to help him obtain the loan modification instead of selling the home through short sale. However, he had no way of knowing that my integrity demanded that I help him achieve whatever he decided, regardless of my earnings. The point is he was taking a HUGE leap of faith with a stranger. This is a very dangerous thing to do, but he was out of options. Unfortunately there is a lot of room for the dishonest person to take advantage of a situation like this.

He could have easily ended up with someone that would have happily allowed him to go blindly down the loan modification path until it blew up in his face a week before auction. At that point, he would be right where they wanted him. His only option outside of foreclosure at that time would be to sign over the deed and allow the agent or an investor to take the home under his existing mortgage. While the negative equity was a hill that would take too long for him to climb, it was exactly the situation that the investors / sharks will try turn into cash.

The investor would take the deed and obtain a limited power of attorney along with an authorization to work with the bank, but keep the note in the original owner's name and begin making payments to the mortgage company. As the new owner, they would be able to owner finance the homes existing fixed rate mortgage to someone else for a large down payment and higher interest rate. With the lending industry being so tight right now, there are people standing in line to get into owner financed homes.

The investor would be able to pocket the down payment and allow his new "owner" to pay the mortgage to them. The new owner would either refinanced into their own name at peak market price a few years down the road or fall behind on their "side" mortgage to the investor allowing him to foreclose on them and get the deed back. If that happened, the investor will simply collect another large down payment from another non-qualifying buyer and keep the ball rolling until the equity returns or the loan is refinanced for a tidy profit on the deposits and cash flow of the increased interest rate.

This and other similar stories are being played out by the thousands, every day, all across America, right now. Unfortunately there are a lot of folks that are not able to navigate through the shark filled waters safely.

Brad Brusenhan, Pre-Foreclosure Specialist, Realtor & Loan Officer
Brusenhan & Associates Realty
www.DFWRealEstate.info

Brusenhan & Associates Realty provides short sale services for homeowners with FHA mortgages in default across America. In the Dallas / Fort Worth metro area of Texas we provide all types of pre-foreclosure assistance, including loan modification, regardless of the loan type. For more information, please contact us at 972-312-1052 or visit our website at www.FactsOnForeclosure.com.

In a recent post, I shared about my experience with a 2nd lien holder (WAMU) charging off an account while in the middle of negotiating a short sale. Once I found out about this, I was transferred out of loss mitigation and into the charge off department. There I was told that they would require substantially more money than what I had already been told was needed by the loss mitigation department.

I decided to give it a little time and then called back through the normal channels about a week later. I did not go to the person holding the file, even though I had their direct number. After all the typical running in circles, I was finally told that because it had been charged off, the buyer no longer needed approval from their bank. I then shared the information that I was just told a week earlier by the person with the file in the charge off department. I explained that they stated the terms they would work with in order to approval the sale.

The lady then told me, "That was then and this is now. Now you don't have to pay us anything." I asked for explanation for my own curiosity and education. I was that she was not authorized to provide any further information. I confirmed a couple of more times, as it wasn't making sense.

At this point, I have my title company looking into the matter for verification. It will be Friday or Monday before I hear back. I have some ideas as to what may have happened, but am wanting to hear from others. Have you ever run across this in the past? If so, please share. Even if you have not, but have ideas as to why this unfolded this way, please comment.

Regards,
Brad Brusenhan

Short Sale Troubles...

I have been working a short sale with Aurora as the 1st lien and WAMU as the 2nd. After much discussion and effort, I was told by Aurora that the minimum net they would accept on this particular home was $158,000. They were offering only $1,000 to the 2nd. After talking to the WAMU about the $1,000, they declined and stated that if I would get them $2,000, they would take it. I was told that their guidelines permitted $2,000 for a 2nd position lien on notes between $40,000 and $50,000.

So this didn't appear to be very difficult. All I had to do was close the $1,000 gap. While I was in the process of working that out, WAMU decided to charge off the 2nd lien debt about 20 days prior to the scheduled auction date. It is common to have a property pulled from auction to allow time for closing when an acceptable offer is available and approved. Of course the 2nd will not foreclose, so I am typically focused on the 1st in this regard.

Once I got back to WAMU to update them on my discussions with Aurora, I was told that it was not in the Loss Mitigation department any longer and was transferred to the "Charge Off" department. Once I got there, I was told that the max they would allow me to earn for the work was 4% total to be split. Next I was told that they would only approve the sale if they were to net significantly more then what they had previously told me.

It appears to me that WAMU is basically telling me to jump in the lake. As of now, we are set to auction in less than a week. Does anyone have any insight as to why this is unfolding this way. It simply doesn't make any sense to me. The only thing I can come up with is that they must be receiving more money through the back door for charging off the loan then they would have received from the short sale. As it stands now, on this coming Tuesday, the first will wipe out the 2nd lien though foreclosure, if that ends up happening.

I am left to wonder if there is some type of financial incentive through some of the bail out money for the 2nd to allow the foreclosure. Outside of that, it simply doesn't make sense. I've learn over time to simply follow the money. If that is the case, can someone please explain how it is that this money is helping the homeowner? It appears to me that it may only be helping WAMU. Regardless, the homeowner is left out in the cold and we have wasted a lot of our time with banks who have no incentive or desire to actually work with us. It is their right to decline the short sale, but if this is the new mode of operation, we need to know so that we can adjust our business practices.