I was on a call with a lender and REO specialist this past week, and asked them both a series of questions on this topic. Their responses were educated and particularly unsatisfying, although there were a couple of nuggets I think you’ll appreciate.

First, all of us know now that one of the major headaches in the current financial situation is that the loans have been sold, invested, re-sold, and reinvested so that actually FINDING the lender is problematic. For months I had a naitivity about this, extolling any lender I knew to get out and actually start proactively helping the clients they knew would soon become problems. All of them told me to pound sand.

So, let’s start by acknowledging that in many cases actually uncovering the owner of the current loan paper is difficult, and that ALL the standard short sale issues we’ve faced before likewise are in play. Are there then, you aptly ask Steve, any actual pieces of useable information we can pass along to our clients other than the usual dribble from the pundits?

I heard a couple, albeit not far reaching ideas, which we can use to at least put another tool at our client’s disposal. The first idea was to use forbearance. This is a tool that may be available to most borrowers, although unknown to them. Simply put, a clause in the mortgage that allows the client to make a legal request of the lender to forbear, or forgive for the immediate, a payment on the loan that will be tacked onto the end of the loan.

Okay, let’s not pretend that this is what every client needs, or even wants, but it is an action item that can be taken if appropriate, and one that a good Realtor should be willing to bring up as a possibility with a client who they are trying to serve.

Next, what about the idea that a short sale might REALLY not be in the client’s best interest? Where’s my credit guru out there? I hear lots of talk where people (you know those people again) say that “foreclosure will ruin your credit.” Well, as Jack Webb used to say, “Just the facts, mam.” I have information that one’s credit will drop X points in a foreclosure, and Y points in a short sale. And then the time before which a lender won’t punish you because of this misdeamenor is Z for foreclosure and ZZ for a short sale. If, as I suspect, the damage is relatively similar, and given the tax consequences and grief associated with a short sale, why not suggest to the client that they simply walk?

Again, before rendering me shallow or unprincipled, what I am strongly suggesting is that Steve has asked a question that begs answers some us had better come up, or just join the ranks of the pontificators who have ideas…..not solutions.

Steve, you are NOT alone, believe me. There’s lots of wasted time, and not only wasted, but time given up without even giving up something of true value to the beleaguered client.

THis is exactly what I have been talking about for months. The lenders seem to be setting up to take a BIG government bail out.
They planted the seed, cultivated a crop over extended buyers with over valued property. Now they are going to harvest every last one. What they can’t harvest they will make Mortgage Insurance claims for and the rest they will wait to unload when the markets turn around.

They, they, they… I think there is plently of blame to go around including brokers and realtor putting pressure on apraisers; to agents working the mortgage system to get people qualified. Remember, it is the NAR that has lobbied Congress for the lax lending standards while selling the mantra of the ultimate refi, that unforthuantely for over extended homeowners, has never materialized. Realtors can’t put all the blame on the mortagage industry, but go ahead and try if you must. The facts prove otherwise however.

Don – I really appreciate your great comments on my post. This is an area that most agents have never had to deal with unless they were around during the early-mid 1990′s. I cannot overstate the frustration I am having in trying to find someone in the lending industry who we can communicate with. I am not trying to place blame here, as kc suggests. There is plenty of that to go around and it is a waste of our time to dwell on it. It doesn’t solve anything, although it is a good lesson for the future. I’m just trying to solve real problems for real people and it’s just frustrating because it’s like we don’t even speak the same language as the staff people at the major banks.

While it doesn’t help today, I just hope in the future that the communications gap between lenders and real estate agents is significantly lessened by what we are all going through now, hopefully to the benefit of consumers of our services. Mortgage/ Mortgage Broker reform would be a good start, such as:

1. A separate license for mortgage brokers;
2. Requiring an “Agency/Fiduciary” relationship between mortgage brokers and their clients/borrowers;
3. Prohibit mortgage brokers from representing buyers in both the purchase transaction as their agent, and at the same time arranging their mortgage. This creates the potential for a huge conflict of interest.
4. Require disclosure to the borrower of all fees/commissions to be paid to the mortgage brokers, be it from the loan transaction itself as well as from the lender.

My comments were in response to Kent’s post and his blog that blames the banks for the mess in Denver, not the wise analysis of Steve.

kc – Yes, the blame must be shared by all. No doubt about it. Hopefully, we all learn from this. Thanks.