Without diving too deeply into the detais, the investor groups that own mortgages that are being foreclosed on, rely on loan servicers to handle the pre-foreclosure sales (generally short sales). Servicers are severly understaffed with a typical "negotiator" handling in excess of 100 files at a time. The question is why don't the servicers add more staff? Why aren't the investors insisting that they add more staff? Delay means their losses are mounting daily.
Buyers and their agents are becoming extremely gun shy of short sales, knowing it will probably be at least 45 days to get a yes or no on their bid and may well take 60 to 90 days or more. Many agents counsel their buyers against pursuing short sales and many buyers no longer need to be told, they know from experience.
That said, many agents don't really know what it takes to get a short sale done, which exacerbates the problem.
Investors set their approval criteria for short sales based on discounts from appraisals.
However, there is clearly an added discount being taken by buyers now because of the time it takes to get a response, the odds against getting a favorable response and the additional loss in value the property incurs while the process grinds out.
The investors who own the mortgage don't seem to recognize the added discount.
Given the obvious losses generated by the inefficiency of the (pre-foreclosure) short sale process, it's hard not to conclude that the investors are waiting for the big government bail-out they anticipate will ultimately arrive.
Perhaps it will come after the passage of the pending Dodd legislation minimizing lenders losses at 30% of prinicipal to the tune of $300 billion of taxpayers money. Oh, incidentally, the word is much of the original legislation language was provided by Bank lobbyists.
Once the lenders have gotten approval to foist their worst loans onto the taxpayers, maybe they'll start to unload. After all, a 30% loss is way better than a 50% loss or more.
Mike Davis is a Loss Mitigation Specialist with Equity Loss Mitigation, LLC, a firm that specializes in Short Sale Representation, Loss Mitigation and Loan Workouts for borrowers as well as an Associate Broker with Davis-Resnick Group, LLC which is affiliated with Keller-Williams Crossroads in Annapolis, MD.
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