Playing Hide and Seek with Lenders

Working an effective short sale can seem impossible if your Seller is not providing you with accurate information.  The very first thing I require from all Sellers is a ‘complete’ Seller Information Sheet.  My Seller Information Sheet is customized to specifically catch every pertinent fact about the Seller and the house.

Below are several things that I need in order to review the deal and determine my exit strategy as an Investor and/or Realtor.

1. Seller(s) name, phone number, email address.
2. Property Address.
3. Their estimated value and how they came up with that figure.
4. Their asking price and how they can up with that figure.
5. Is the property listed or has it ever been listed?
6. Is the home vacant or occupied by the Seller or a Tenant?
7. If Tenant occupied, I request the terms of the lease, rent amount and security deposit.
8. Information about the house – beds, baths, square feet, lot size/location, garage, construction – brick/stucco, pool – operative or not, date purchased and amount owed.
9. Lenders/liens on the property, amount owed, adjustable or fixed, interest rate, monthly payment and does it include taxes and insurance.
10. Is there a Homeowners Association and if so how much?  Yearly, Quarterly, Monthly.  Are they current or behind and how much in arrears.
11. Name of the Homeowners Association.
12. If they pay their own taxes, how much is it and are they current or behind?
13. What type of mortgage do they have on their home?  FHA, VA, Conventional  80/20 loan?
14. Will they sell the house for what they owe?  If yes and it is upside down, then it has to be a short sale.  If no, then after all the debt is paid off including closing costs, how much do they want in their pocket?  Once they give me that amount, I ask them if that is the best they can do?  Believe it or not, they drop it even more.
15. What are they going to do if they can’t sell the house?
16. Do they own any other houses?
17. I will also need to know what the values are on the home.  I use my MLS, ReiFax, Zillow and Trulia for sold comps.  When looking at the values, you should only go back 90 days.

Only after I have all this information am I properly equipped to structure a successful and profitable deal.  You skip these questions and you are asking for trouble down the road that will kill your deal, maybe even at the closing table.  If your Seller is not willing to provide you with the above information, then they are not as motivated as you thought.  Most of my Sellers initially tell me that they are working on a loan modification or they have hired an attorney to represent them in the foreclosure action.  Understanding what the Sellers want will assist you in making your deal happen.  When they are attempting a loan modification, I ask they what they want from the bank.  Is it a reduction of the principal or a change in their monthly payment?  I will walk them thru why a loan modification may or may not work for them.  If they have an attorney involved, I ask “What is the attorney doing for you?  Are they doing a forensic exam to dispute the paperwork or are they stalling to either get a loan modification or get you more time in the home?”  Understanding their expectations of the attorney will help you construct your deal.

Many loans have been sold off multiple times which may require you to do some investigation as to who is holding the loan that we are attempting to short sale.  I am currently working a deal wherein the Sellers had two loans on the property.  Both were with Countrywide and then bought by Bank of America.  The short sale lenders that we deal with are typically the servicers on the loan, so many times we are not dealing directly with the investors of the money.  Many people don’t understand this practice.  The money was loaned by a group of investors, which could be REITs or Trusts.  Then they give the money to the banks, who are servicers for their money, who in turn loan the money to the Sellers.  The first loan on this deal went back to Bank of America who has no knowledge that there is a second on the property as the servicers don’t pull title work.  And if you are not pulling title work well in advance of closing your deals, then you can expect some harsh last minute surprises.  Please be proactive on this, I want to see you closing deals, not losing deals! The second loan was given to Litton Loans but is no longer active and was given to a collection agency.  That is where the trail goes cold.  I have sent an authorization to the collection agency and they are going to research who has the loan. 

Do you remember when 60 minutes had busted the banks for Robo signing of documents?  If not, you need to google www.60minutesovertime.com and look up Robo signing.  Mortgage Electronic Registration Systems, Inc. (MERS) is an American privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.  When a lender assigns their rights to MERS, no information is given to the public as to who now owns the loan.    However, you are able to find out who is the servicer just by going to www.mersinc.org and click on  “information for homeowner” and then “my mortgage info.”  Then click the “online” link and you have several options to locate which lender is servicing the loan.  I would recommend that you put in the MIN number which you can find on the front page of the mortgage or use the sellers name, social security number and zip code of property.  With the help of MERS I was able to find that the second mortgage is with Ocwen.

In a worst case scenario, if it’s not a MERS loan and the seller has been out of the property for over a year, you can have them submit a new change of address with the post office which only lasts for 1 year.  That way, all communication from the unknown party(ies) will come to them again.     

Again, you must always, always have title work pulled first thing on your short sale deals.  This tells you upfront if you are going to have any challenges with additional liens.  The title company will conduct a search going back 40 years to expose any liens or encumbrances.  They also conduct a name search.  The name search will pull up any outstanding credit card judgments, civil judgments (child support liens) or any other liens.  On my particular deal, there was a child support lien.  Although the names were similar, in this case, the lien did not belong to my Seller.  If it did, I would have had to also short sale that lien.

The best advice that I can give you on any deal is to have your team player ready that will work with you and do whatever is necessary to close this deal.  In this case, it is my Title Company.  I would also recommend having a relationship with more than one Title Company, as their rules and regulations change. 

I look forward to providing you with future tips so stay tuned or join me at my next boot camp.

Happy Negotiating!

Kimberlee Frank