Randy L. Prothero - Hawaii REALTOR®

I was speaking to a real estate agent from another state and he was venting about his experience dealing with a short sale. After 6 months in escrow and next to action from the lender he is told that the loss mitigation guy who was working the file had 3800 files to work. Let me say that again 3800 files!

I am not a rocket scientist, but logic tells me that if you truly want to move these properties you would bring in some warm bodies to work these files. There is no shortage of out of work loan officers and real estate agents who are more than qualified to process paperwork. The time they are sitting on the market is losing value at a greatly higher rate than it would cost to hire a few more employees.

So what could be their motivation for so little action?

• Could it be that they are delaying showing the losses on their books?
  • Would their bonuses be directly impacted by that?
  • Are they trying to withhold the full truth from their stock holders?
• Are they trying to break the housing market even more to get more of the bailout money?
• Are they just that incompetent?

No matter how you explain what the big banks are doing, their lack of action is causing the problem to get worse. The amount of time these homes sit and rot on the market is causing everyone else's homes to drop in value around them. They are making the purchase of one of these short sale, pre foreclosure or REO homes so painful that most buyers and real estate agents try to avoid them.

They are causing so much harm to others and entire communities by their actions or lack of actions; it may only be a matter of time before some legal types see a way to make a buck and go after them.

With all of the folks in financial trouble and the numbers of home owners upside down (owe more on their mortgage can they can sell the home for), a new industry and many new scams are popping up.

Mortgage modification, renegotiation or restructuring is the new buzz. Franchises are being sold, seminars are being held and spams are flying around the internet. The next wave of prosecutions is probably a year or two away, once enough of the public are taken advantage of. I am sure there are legitimate companies out there, but the public better beware.

If you are in a desperate situation and you need to either restructure your mortgage or go into a short sale or seek some other form of relief; be very, very careful. There are charlatans are every corner. Beside the "We Buy Homes" scammers there are several new groups popping up including "Mortgage Modification Services." I am sure there are some professional organizations that are good at what they do. There are many, many more scam artists looking to take money from you.

Yesterday I attended a seminar hosted by a local escrow office. Once it began we quickly realized it was a sales pitch for a service. The service actually operates out of state and claims to be utilizing attorneys. Being out of state puts them out of reach of our state regulatory agencies. The very same problem we run into with out of state lenders. If they do something improper, you have very little recourse.

If you are in this situation and need legal advice seek a local attorney.

If you need Hawaii real estate advice, give me a call or an e-mail. If I can not help you, I can point you in the right direction. What ever you do be careful and look for the appropriate professionals.

During the hot real estate market a few years ago banks, federal government and people committing fraud caused property values to artificially jump. Today the same banks and the same government are causing the those property values to drop all over the country. I spoke about how lenders are causing property values to decrease by their incompetence in a previous post: Lenders Are Causing Property Values to Drop.

Now they want us to be grateful to them for saving us with our own money (massive amounts of it). I for one am not grateful, I am fed up.

Congress made laws requiring banks to give bad loans and then took kick backs from them (campaign donations and sweet heart loans). Those in congress knew Fannie Mae and Freddie Mac were in trouble 4 years ago and did nothing about it covered it up and protected them; so they could continue to write even more bad loans.

Since that time members of congress continued to take money from Fannie, Freddie and the lending industry. Executives from Fannie and Freddie left with giant bonuses after riding those institutions into the ground and cooked their books. Instead of prosecuting them, many found golden parachutes. A few of them are now financial advisors for the presidential candidate who was the second highest collector of donations from Freddie and Fannie. I wonder what advice he is getting. Are they planning the next crash and burn cycle? I definitely will not be saying thank you to congress. I have no Aloha for them.

Lenders and government sat back while massive amounts of mortgage fraud went on around the country and did very little. In some cases they were active participants. Mortgage fraud caused property values to climb artificially in communities across the country. Consumers buying homes at that time paid more.

Now the very same lenders are driving down prices in those communities. They are causing consumers to lose money and their homes in some cases.

So again I say, NO ALOHA for Congress and the Lending Industry.

Lenders are a major cause of property values dropping in many communities. I am not going to argue about their lending practices and the volume bad loans they issued. I think that is a given.

The incompetent way lenders have dealt with these bad loans is causing the problem to escalate in communities across the country. They have made it such a painful, lengthy and expensive process for buyers to purchase these properties that the lenders are forced to accept less money than they otherwise would. Once they start that cycle in a neighborhood, property values drop, making it impossible for more struggling home owners to sell their properties, causing another wave of short sales and foreclosures. The lenders continue to mismanage them causing the cycle to repeat.

It is bad enough that the lenders with pressure from congress gave out loans to people who could never afford them. It is criminal that lenders are now causing innocent citizens to lose their homes because of the incompetent way they are handling the properties are under their control.

I have heard the story about how overwhelmed they are with the volume of homes involved. All I can say is BooHoo. Let me get out my violin.

The amount of money lenders are losing they can easily justify hiring an army of people to expedite these in a more professional way. There are real estate agents, loan officers and other lending industry workers out of work all over the country. The homes I was looking at in the last few days were being sold anywhere from $50,000 to $100,000 below market value. The more they sell like that the more the prices will go down further.

The bottom line is that the better the lenders handle the sale of distressed properties, the less of them there will be in the future. Lenders will also take smaller losses on each one.

I have watched lenders one by one drop like flies over the last few months. I see commercials telling consumers in trouble to contact their lender, because they want to help them. I honestly do not believe it. Have you ever tried to contact a lender for a short sale packet or to discuss not being able to make the payments and the need for some relief? Fortunately I have not been in that situation, but know several folks who have. They all have a consistent story. The lender would not take their call.

I personally have avoided doing short sales as much as possible. Dealing with the delays and the non-sense from the lenders just does not seem like it is worth the trouble. Buyers I work with so far have not tried to buy one. (thank goodness)

Currently I am working on a REO sale. The bank took the home back through foreclosure and has it listed with a real estate agent. She is a very good agent in my area that I know. We put in an offer and got a verbal acceptance. It has been over 3 weeks and we still do not have documents back from the seller (bank). While waiting to get this in escrow the interest rates have gone up a little. (Bad for the buyer.)

As time passes the buyer's excitement about this property is being replaced with doubt. If rates climb again it may be replaced with moving on.

When we put in the offer, we were told we could get a response in as fast as 24 hours. They must be using the metric system. If this takes much longer, the lender will be looking for another buyer.

So if these lenders are so overwhelmed with so many properties to deal with, would it not make sense to expedite the ones they can and get them out of the way? Wouldn't logic say that they are losing even more money by their incompetence and lack of urgency?

How many more folks out there feel the same as I do? If I had my choice I would avoid dealing with the lender controlled sales. With them creating that negative environment they are causing even bigger loses. Over the last year, I have read many articles and blog posts about this problem, yet if anything the lenders have gotten worse. I guess they simply do not care.