Rocky Road REO: Foreclosure Recisions, Lawsuits, and Show-Me-the-Note!

Oh boy.  Since the last time I shared some spicy anecdotes from the REO World a couple weeks ago, I’ve had some ripples-cum-waves rocking the REO boat here at the Silicon REO Group. Pull up a chair and allow me to share some anecdotes from the REO Broker trenches.


It started last week, just before Thanksgiving.  There I was, getting into the Holiday Groove and looking forward to spending some time with my extended family, when I get an e-mail from a pre-marketer telling me that a listing was being cancelled because the foreclosure sale had been rescinded.  D’oh!  It was actually my most expensive listing, and I’d spent the past couple of months working on it on-and-off:  the occupancy check, weekly inspections, BPO, activating utilities, and I was just waiting for the listing agreement to be sent over and the calls from hungry agents to roll in. But no – instead of the listing agreement, I get the e-mail about the recision, and sure enough, the property promptly vanished from RES.NET.  It was completely unexpected; usually, the former owner will contact me, the listing agent, and inform me they are working on getting a recision (which rarely happens) – but this time the former owner (who I never met or communicated with) kept me out of it.  Hmph.

Well, bully for the former owner, I hope it works out for him.


I have another assignment where I’m working on getting the occupant to vacate the premises.  First, the occupant wanted to get the foreclosure reviewed by the lender, as he thought he’d been working on a loan mod.  A couple of weeks ago, the word came down that the foreclosure would not be rescinded, the loan mod had definitely been denied, and that the bank wanted the occupant to leave the property, and the occupant was presented an updated cash-for-keys offer.  I left messages and e-mails for the occupant about the new CFK offer, but did not hear back from the occupant for over a week.

When I finally did hear from the occupant, he let me know he was insisting that the lender show him the note.  Oy vey.  So I let the eviction rep know that the occupant refuses to negotiate further on surrendering possession until he is shown the note.  I also let the occupant know that in all likelihood the seller will be able to provide him with the note, and that he will need to be leaving soon one way or another, and please let me know when he can be out of there, assuming that the requested documentation will soon be provided.

The whole show-me-the-note thing kind of aggravates me.  The show-me-the-note folks usually don’t deny that they didn’t make their payments as agreed upon, the remedy for which per the note is that the house is foreclosed on and ownership reverts to the lender.  Nope, that’s not in dispute in most of these cases; rather, the former owners are looking for a technicality which allows them to keep the property even though there is no question that the borrower did not keep their mortgage commitment.  A lot of folks can justify this by saying the banks are rapacious predatory lenders or whatever and therefore they deserve what they get – whatever.  The buyers were happy enough (even thankful, grateful! in many cases) with the bank when they originally got their mortgage loan, I can assure you of that.

My sympathy for the occupant in question has evaporated at this point.  Time to go, Jack.


If that wasn’t enough fun for one week, the capper came yesterday as I was going about my rounds inspecting the REO properties in my care.  I got an e-mail from my broker, saying that we had received a certified letter from the former owner of an REO listing I have.  The former owner was writing to us as a courtesy to let us know that she would be filing a lawsuit against the lender for wrongful foreclosure, and that we might want to cancel the sale – naturally, the property in question is in escrow and set to close in a few weeks.

Fun stuff.  I forwarded a copy of the letter to the asset manager, who said we should proceed as usual until the lawsuit actually gets filed.  I also sent the letter to the buyer and suggested they consult an attorney.  Naturally, my brokerage immediately consulted our attorney and our Risk Management company to get advice.  I read the letter (and several pages of print-outs from the blogosphere pointing a bunch of smoking guns at the lender) and was left with the distinct impression that the former owner has gone off the deep end – probably several years ago – and that in all likelihood the former owner was a victim of the exploitative foreclosure rescue industry.  The former owner will probably pay thousands of up-front fees to a lawyer to sue the lender, and more likely than not, end up losing both the case and a lot more cash.


Ahh, good times, good times.  To many people on the outside, the life of a busy REO Broker must seem like a dream – but to those on the inside, it’s often more like a nightmare.  I just take the good with the bad, roll with the bunches, and await my next assignment with eager anticipation.

Happy Holidays!


Cash for Keys Gone Sad

I had a couple of cash-for-keys appointments today, a couple more of my listings moving up the status chain – now they’re vacant and secured and in pre-marketing, they should both be listed within the next 1-3 weeks.  Ordinarily the prospect of some good new listings coming on the market is cause for a smile, but today the joy is bittersweet.


One of the cash-for-keys appointments was a full week past the originally agreed-upon date.  A day before the original vacate date, I rolled by the property to see how the occupant was coming:  he wasn’t coming along quickly, the house was still full.  I found him in his driveway standing amid an ocean of possessions, he was having a garage sale – not the quick way to divest yourself of a whole house full of possessions.

We talked, and he agreed he’d need some more time; he said he’d need just til Wednesday, but when I wrote to the client, I said I didn’t see him getting out of there any earlier than Friday.  The client agreed to extend the vacancy until Friday at 5 PM, which was good – because sure enough, once Wednesday rolled around, he wasn’t ready then either.

By Friday morning, he still wasn’t ready.  I drove by to see his progress – still far to go.  He said he’d be ready by Saturday morning – but come Saturday morning, he still had a few more things to do. And so it was on Saturday afternoon, when he then swore up and down he’d be ready by 9 AM on Sunday morning.

A rainy Sunday morning at 9 AM found me at the house with a contractor to change the locks.  Unfortunately, the occupant still was not ready.  Bummer, because now I’d have to pay the contractor a trip fee – which he generously waived (thanks Mike!).  I told the occupant that he should just call me when he was in fact ready, rather than saying he’d be ready on such-and-such a date and time and blow it again.

The next day, he called and said he would be ready.  I called and asked the client if he could still get all his cash for keys money, even though he was a week late.  The client said for me to go ahead and give him the check if the property was vacant and in broom-swept condition.

And so it was, the occupant had followed my instructions to the letter and the house was totally empty.  We were walking from the garage into the house, and I noticed he wasn’t behind me.  He’d stopped back in the garage, and was weeping quietly against the wall.  “Hey, are you OK?” I asked.  No answer…so I walked inside the house and gave him some time alone.

He didn’t want to let go of that house.  He said he’d never refinanced it like so many others had, he’d bought it, and put $45,000 worth of materials and his own time upgrading the property, remodeling the kitchen entirely, etc.  He was going through a divorce, had recently quit his job, and had three kids – and now he’d lost the house, and was living in a rented room.

There’s really no way around it:  that blows.  There’s no shortage of hard-luck stories in the REO business, but sometimes the emotions are just so raw and you’re right there in the thick of it – and what’s there to say?  A lot of times in this business I feel like I’m part life-coach, part therapist – which is something I really ought to put on my REO Résumé because it’s definitely part of the job description.  All in a day’s work, can’t wait to see what tomorrow brings.

Cash for Keys Lawsuit

So I was involved in a lawsuit the other day.  OK so maybe that’s a bit of hyperbolic link-baiting, but I’m trying to be a savvy blogger as well as a top-notch REO Broker, so you’ll forgive the indulgence. I sure enough was involved in a Cash for Keys Lawsuit, but it was just a small claims court case, and the future of western jurisprudence is hardly to be affected by the outcome.


Here’s what went down:  back in July, I was assigned an REO, so I went down and did the occupancy check and met with the (former) owner.  He said he lived there, and had some tenants who were renting a room (they were a couple).  So I took down everyone’s name, and let them know the bank would probably be offering cash-for-keys and that I’d be in touch again soon.

I called back in a couple of days, once the bank had told me how much to offer and such.  The former owner told me then that one of the tenants, the male, was “no longer in the picture” and had moved out.  OK, fair enough – I didn’t ask why, it doesn’t really matter why – if he’s gone, he’s gone, more power to him.

I ended up negotiating Cash for Keys with the former owner and the other tenant.  They actually got out of there in darn near record time; within 3 days after signing their agreement, they were handing me over the keys to a very vacant and broom swept house.  They got their cash and went on their merry ways.

A couple of months later, I got a phone call from the male tenant who had vanished.  He said he felt he was owed the same Cash for Keys money that the other occupants had received, because even though he was not there when I negotiated the cash for keys or when I disbursed the cash, that he was still a legitimate tenant and should have received “financial relocation assistance” as well.

The bank that doled out the cash for keys money told me they wouldn’t be paying him, since in their view he had no legitimate claim to any of the money.  The occupant ended up filing a small claims lawsuit, against the two other occupants and my real estate brokerage – but, interestingly enough, did not include the bank in the lawsuit.

Our day in court arrived; I had to spend nearly four hours there, sitting through sad case after sorry mess, listening to the judge dispense wisdom and righteous decisions in a dismal spectacle of small claims woe.  We were the last case to be called.

It turns out, the reason the tenant was “no longer in the picture” was because he had been in jail for his 4th DUI and then had a restraining order taken out against him by the other tenant.  The judge ruled that there was no obligation to pay anyone cash for keys, the banks do it to avoid an eviction (which never took place), and that unfortunately for the plaintiff, due to the choice he’d made to go drunk driving, he was not living in the property at the time CFK was offered – and it didn’t matter if he was a legitimate tenant or not, since the bank don’t have a legal requirement to give him or any occupant any money regardless.

The judge found for the defense (my brokerage, and the other occupants) and off we went, victorious before the bench.   To my mind, the outcome was a foregone conclusion and it was a frivolous lawsuit at best, but what can you do?  I don’t make the rules, I just play the game and follow them as best I can – which keeps the Silicon REO Group coming out on top.


Getting Your Foreclosure Rescinded

There’s a common refrain I hear from (former) owners of foreclosed houses:  they were working on a short sale, or a loan modification, they thought everything was going along fine, and all of a sudden, I show up at the door and tell them the house has been foreclosed on, and are they interested in Cash-for-Keys?


It’s actually a pretty rare event these days when someone hasn’t been in the process of working with the bank to somehow avoid foreclosure at the time the property gets sold at the trustee’s sale.

There’s often several angst-filled days as the (former) owner makes calls to the loss mitigation department and tries to find out what happened to their short sale or loan mod.  Often times, the borrowers are able to reach the right someone with the lender and the foreclosure is reviewed – as you have perhaps read in the headlines lately, mistakes can happen.  Many (former) owners hope to put their loan mod or short sale back on track and have the foreclosure rescinded.

Does this happen?  Yes, absolutely!  It can happen.  If a mistake truly has been made, then the foreclosure often gets rescinded in fairly short order, within a week or two typically.  And then I close the book on that file and go along my merry way, waiting for my next REO assignment or, more like it, busily servicing the ones I already have.

Sometimes it can take weeks or months for a lender to finish reviewing the case however, in which case I as the REO agent will hang back and wait for further instructions from the client.  That must be fairly agonizing for the (former) owner, I imagine – after months dealing with the loss mitigation department to now stand at the precipice and wait…and wait…and wait some more, sheesh, I don’t envy these folks.

Sadly enough, in almost all cases, the loan modification or short sale was denied, however the denial was not communicated to the borrower, and the file was sent without a murmur to the trustee’s sale.  Usually the borrower is notified, but sometimes it happens that they don’t receive the notice that their home is to be sold at the trustee’s sale, and that’s why it’s often such a rude shock when I show up to do the occupancy check.

But yes, it happens – foreclosures do get rescinded when mistakes are made.  If you ask me, though, the foreclosure may not be the worst thing that could happen, particularly for people who are doing loan modifications. Loan modifications, to me, seem to be kind of a raw deal for the borrower.  Yes, the payments get lowered, but very few loan modifications result in any meaningful principal reduction.  To lower the payment, lenders will lower the interest rate, stretch out the loan term, or add a fat balloon payment.  In most cases, the mortgage payment is still going to be higher than it would be to rent a similar property – except that the borrower is still going to be stuck owing dozens or hundreds of thousands of dollars more than the property is worth.  If we were on the verge of rapid price appreciation, it might make sense to lock yourself (again) into a long-term obligation for massive debt; however, most market watchers are saying that any significant price appreciation is years away.

At least with a foreclosure, the borrower typically escapes that crushing debt, and it’s a chance to start over, live cheaper, and start saving for the future.  Getting your foreclosure rescinded and into a loan mod may seem like victory of sorts, but it’s a pyrrhic victory if you ask me.  In most cases I think folks would be better off cutting their losses and moving on.  So if you find yourself working to get your foreclosure rescinded, I invite you to think twice, since the foreclosure itself may well be a blessing in disguise.


REO Inventory on the Rise

A few weeks ago, I posted a blog entry about it looked as though lenders were stepping up foreclosure.  Since that time, I’ve continued to see a steady stream of REO assignments – kind of like in the good old days (all of 2008 and much of 2009).  That explains a bit about why it’s been a while since my last blog post – I’ve been busy doing occupancy checks, re-keys, negotiating cash-for-keys, overseeing trash-outs and initial services, all that fun stuff.

Housing Flood

Yesterday, the venerable and still-somewhat-respected Wall Street Journal chimed in a piece informing us that housing inventory climbed again in September – for the ninth straight month!  It’s a pretty nifty article and it gives stats from 26 metro areas throughout the United States.  In California, they provide data for Los Angeles, San Francisco, Orange County, and San Diego.  For San Francisco, the chart they provide shows that the available inventory increased by 5.4% at the end of September compared to the previous month.  Their interactive chart also has a cool feature where you can see the inventory level rise and fall for any of the metro areas over the past 18 months – and looking back, you can see that from January 2009 through December 2009 the inventory in the San Francisco area slowly declined – but it’s been rising ever since, and is now back at about the same level.

What, pray tell, could this mean?  I think it’s clear that given the overall anemic demand from buyers for most types of residential real estate that we are going to be seeing a lot of price pressure over the coming months – it could be a very cold and dreary winter for a lot of people trying to sell their houses.  And they’ll have to compete with REO sellers, who are often in great competition with each other, who absolutely-positively-gotta-sell-it and will mercilessly reduce the asking price until the right buyer comes along, although this process can take months (they don’t just give away these REOs you know – not usually, anyway).

Interestingly enough, the Wall Street Journal’s chart also provides one other interesting piece of data:  the percentage of homes that have had a price reduction as of the end of September.  In the SF Bay Area, the figure stands at 44% – which may seem high, but compared to the other 25 metro areas surveyed, it’s probably a little bit below average.  I wonder, though – will we be seeing that number pick up over the coming months?  With the way things are going, I don’t see any way around it.

Cash for Keys: Fun and Games

So a few weeks back, my favorite REO client assigned me a new property. So I waited a few hours before going out to do the occupancy check, because on weekdays I like to go in the early evenings, hopefully after people have come back from work. When I knocked on the door, it was answered by a friendly looking-and-sounding guy, and I delivered him the news, as tactfully as a diplomat, that unfortunately the home had been foreclosed on.

He explained that he was a tenant and he had no idea the home had been foreclosed on. The home had been listed as a short sale a few months back, and he had no idea why the listing had been cancelled, the owner didn’t tell him anything about it. I asked him if he had a lease; he said he did not, that they were on a verbal month-to-month arrangement. I got his phone number, and said I’d be in touch after finding out what the bank wanted to do, now knowing that the property is tenant-occupied.


As I’m driving back home, I got a phone call, from a woman who identified herself as “Lily” (names have been changed to protect the guilty!). Lily explained that she was the owner’s sister, that the owner had asked her to call me – she was kind of agitated, denying the home had been foreclosed on, etc. I asked her, why are you calling me, instead of the former owner? “Uhh…I don’t know, she just asked me to call you.” Hmmm.

And, a day or two later, the former owner did call me. I asked her why she had Lily call me. “She’s the lady I hired to do a loan mod for me,” she replied. Oh. “She said she is your sister,” I told her. “No, she’s not my sister…” OK, at least we’re clear on that. So I said, “You know, it’s a bit funny that you even qualify for a loan mod, since you don’t live there.” She had an answer for that, too: “Oh, but I did live there when I started the loan mod process.” Hmm, sounds a little fishy, since the tenants indicated they had lived there for over a year. I asked her if she had actually paid this woman Lily some money to help her – oh yes, she had. I let her know that there are a lot of scammers in the loan mod business, and that California is cracking down on this, and that these loan mod consultants can’t collect money up front. Perhaps unsurprisingly, she hadn’t heard any of this.


The former owner was interested in having the foreclosure rescinded – this happens all the time, and it’s not really my department, but it does tend to muddy up the Cash for Keys negotiation, as the owner usually tells the tenant not to plan on moving since this issue will be resolved in a few days or weeks, etc. Fortunately, the tenants told me within a few days that she former owner had given up on the loan mod, and so they were clear that they’d need to be moving out.

As it happens, though, the occupants had received a letter from the bank explaining their options – I’d actually also delivered the same letter to them as the client requires me to, and a copy in Spanish as well (the wife/tenant only spoke Spanish). The occupants said hey, we like the 90 Day Option – per current law, tenants in foreclosure get 90 days to remain in the property in the absence of a valid lease. I explained that yes, that’s true, but the bank would prefer they move sooner than that and may be able to help them out with some cash if they can move out before then.

The rental market in the area is very tight – so I indicated I would also try to help find them a place to move to. I do that, sometimes – whatever it takes, that’s my motto. So I’m keeping the eviction coordinator back at the bank apprised of all this, how I’m working to find them a place to move to, etc – and earlier this week he sends me an e-mail saying that the loss mitigator on the file has said that the former owner claims that she is living in the property – so how come I said that it is tenant-occupied?

Why indeed? There are several reasons for that – that’s what I was told by the tenants being first among them. So I called up the tenant and spoke with the wife (as I usually do – I’m completely fluent in Spanish). I said, hey – the bank tells me that the owner says she lives there at the house, is that true? “Oh yes, yes it is” she said. Hmmm. “But when I asked you who all is living at the house, you said it was you, your husband, and you daughter…?” A little pause, “Oh, I thought you meant who in OUR family lives there.” Which is not what I meant – I remember this specifically, asking is there nobody else living there, no members of the military? She thought that was an odd question, but I always ask, since the Service Members Civil Relief Act gives active service members special protections in foreclosure.

“But when I talked to the former owner, she gave me a different phone number than the one you gave me for the house,” I continued. She tenant replied, “Oh, that must be her cell number.” Well, it wasn’t – it had a land-line prefix, and she had said, “This is my home number.” Well, I didn’t want to give her the third degree, so I let it by.

There’s a great web site I use for researching former owners and occupants, – you can find out all kinds of interesting things about people there, but it’s also handy for doing reverse lookups of phone numbers, or putting in a property address to see who might live there, etc. So I plugged in the phone number the former owner had given me saying it was her home phone number. In a few seconds, I find that the phone number was connected with a different address in the same city. So I looked up the tax records for that other house, and sure enough – owned by the same person, the former owner of the subject property.

I reported all this back to the eviction coordinator. I told him my suspicion is that the Lily, the “loan modification consultant” had probably told the former owner that in order to get a loan mod, she would have to tell the bank that she lives in the property, and that the former owner in turn told the occupants that if they told me that she lived in the property, she would not lose the house to foreclosure and that they would be able to continue to rent there (which I know they really did not want to move). I also informed the eviction coordinator that all this looks to me like a fraud is being perpetrated here, and asked if there was any more information he needed or if there is anything further I could do.

This morning, he writes back and said that after review, they had determined that no loan workout options exist for the borrower – but that I still need to figure out who exactly is living there so he knows how to proceed.

So let the fun and games begin anew – although I’m pretty sure I know what’s going on here, there may be more to the story than I’m aware, and I need to get to the bottom of it. Working out a cash-for-keys deal is sometimes a breeze, and sometimes, there’s lots of hoops to jump through. It’s all a part of a job which, for all its warts and blisters, is at the very least very rarely boring.

Real Housewife Mansion Foreclosure

It may not be pretty, but it’s the truth: I’ve seen my fair share of episodes of The Real Housewives. All of ’em – New York, Orange County, Atlanta – and even the housewives in Jersey. It’s been interesting to watch as many of them have gone through trials and tribulations related to conspicuous over-consumption, but I’d have to say that the most conspicuous of the bunch have been the Giudice family (Teresa and Giuseppe – but you can just call him Joe, everyone else does!) from New Jersey, with their custom-built super-fab mansion on 3.77 acres.

Apparently, but perhaps not surprisingly, the family is losing their dream house to foreclosure. The Zillow Blog has a great entry about it.

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In my line of work, I run into all kinds of people who got foreclosed on, and it’s true, many of them came to that unhappy fate by simply spending more than they made – but I have yet to see anyone in my neck of the woods do it on this scale. I know, it’s just the bank that got hurt, right? Never mind the investor (your pension fund, perhaps?) who’s probably going to take a bath on it.

Having said that, I must also say – I wish I could pick up a listing like this! I wonder how much they’ll be offered with cash-for-keys?