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

  • December 1, 2010 8:01 am

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.

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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I get an e-mail from a pre-marketer telling me that a listing was being cancelled because the foreclosure sale had been rescinded.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.

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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  A couple of weeks ago, the word came down that the foreclosure would not be rescinded, the loan mod had definitely been denied, and that the bank wanted the occupant to leave the property, and the occupant was presented an updated cash-for-keys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.

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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.

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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!

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REO Flood, Now an REO drought?

  • October 7, 2010 9:07 am

There’s no shortage of prognosticators telling us of a coming flood of REO homes on the market.  OK, a lot of those soothsayers have something to sell you – be it the likes of Lamco Network, REO Vendor Manager, REO Network, numerous REO consultancies and coaches like REO Renegades, SuperStarREO etc. – their message is all the same – join our network, pay the fee, you need to be in all the right places when the flood gates open and the REOs start pouring on the market.

And hey – it’s legit!  I believe it, that explains the copious quantity of dollars flowing from my bank account to some of the above-mentioned outfits.  A lot of folks will point to data provided by our friends at RealtyTrac (who, coincidentally, also have a product to sell you), which, if you believe them, say there are…jeez, I forget how many, 4-5, 7+?… million homes across the United States at some point in the foreclosure process right now.  Of course, they are quick to point out, not all of these properties will go REO – some will be sold via short sale, some will get loan modifications, etc. – but that no matter how you slice it, there’s a lot of REO coming down the pike, although it’s likely to come more as a steady stream rather than an outright flood as many of my colleagues in the REO Brokerage business seem to be hoping for.

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Well, that was then.  Now, klaxon bells are sounding and the blogosphere is in an uproar – they’re pulling the plug on foreclosures!  It started with Ally/GMAC but quickly spread to JPMorgan Chase, Bank of America – and now others.  The New York Times has a couple good articles on the subject (Foreclosure Furor Rises, The Gathering Storm over Foreclosures), that old salty dog Bloomberg weighs in on it (Hydra of Foreclosure Probes).  A lot of states’ Attorneys General area getting in on the act, including our own Jerry Brown and the attorney general of Connecticut has ordered a halt to all foreclosures – while at the moment the foreclosures have ground to a halt only in judicial foreclosure states, it seems likely that it own’t be long before it spreads to non-judicial states like California.  And of course there’s no shortage of grandstanding politicians at the national level, either.  This could get messy (not that it isn’t already – foreclosure is a somewhat messy business).

Perhaps not surprisingly, all of this hubbub has actually reached its way down from on high and touched our business here at the Silicon REO Group.  Two days ago, I received via RES.NET a task to list one of the properties I had in pre-marketing.  Awesome!  I fired off the tasks to the appropriate people on the team – flyer design, MLS entry, ordering the sign up, filing the paperwork with my brokerage, posting on Craigslist, etc. Hours after seeing the RES.NET task, the property was listed.

And then, yesterday – kaboom!  An email from the asset manager arrived saying that the property needs to be pulled of the market, any marketing be discontinued, and that no offers/contracts would be negotiated on it at this point.  Of course, I’m expected to maintain the property and continue doing MSRs (monthly status reports) BPOs and whatnot while we wait to see if the property is to be re-listed, or…or what?  Give the property back to the former owner because there was an error in the foreclosure process?

Somehow…I don’t see that happening.  All this hue and cry about the MERS system and flawed titles, by the way – much todo about nothing if you ask me.  But people have advertising to sell to eyeballs looking to see the banks get theirs and hapless underwater homedebtors hoping and searching for how they can get relief for overextending themselves in the easy money mania of a few years back.  And I get that, and it’s fine, do what you gotta do, it’s a free country, right?

Although I’m no sage, and I’m the farthest thing from a legal or financing expert – I predict that all this will be just water under the bridge in a few months’ time.  For all the social tumult and government inquiries and TARP, HAMP, HAFA, HARP and a whole alphabet soup of other catchy acronyms – the foreclosure train rolls on, and I think it’s going to keep on rolling until the root causes of the crisis are behind us (negative equity, unsustainably high home prices, unemployment).  From the sound of it, we’re still some years away from working through it all.  So I’m prepared for lots of foreclosure drama in the headlines for some time to come – and you should be too.