Armed with Experience: A SHORT SALE STORY

Mr. Freed, 

I just finished reading your article with “Kitty’s” Hardship Letter“ to Countrywide. This brought back some bad memories. Below is my short sale story I wrote for Wiki last July (2008).

If you can use it to help others please do. I wrote this for others to learn from my experience seeking no reward or payment.

All is verifiably true and unexaggerated as it happened. Please feel free to use it on your sight if you think it will help others.

Thanks Bart Horn

 

A SHORT SALE STORY

By Guest Author Bart Horn

 

I need to start off by saying I’m just an average hardworking homeowner caught up in this crisis, as many others are.  I have no professional training in the mortgage industry what so ever.  What is to follow is based off my own short sale experience. 

Negotiating with the lender and my real estate agent (REA) was extremely painful, and motivation enough to share this with the Wiki readership. I learned the hard way that it is a grave mistake to go forward with a short sale unprepared, without competent, professional assistance.

I was not careless or of simple mind, I was uninformed, plain and simple.

To put all circumstances in perspective, after living in a home we purchased for three full years, our first – not an investment property - we relocated to another state due to self imposed job transfer to facilitate my wife, who is permanently disabled, so as to be closer to her immediate family.

We placed our home on the market in June 2006, anticipating an expeditious sale at the beginning of the decline. Needless to say the home remained unsold and vacant for 18 months.

With all equity earned in the home sucked dry by unexpected home repairs from undisclosed problems with the home, that left us unable to reduce the price of the home to make the sale more attractive, that’s entirely another story. An offer did come in as last ditch effort, the only offer to enter escrow was right before the close; the buyer went into default in Dec 2007.  Merry Christmas.

All resources depleted we in turn defaulted with our lender the following month.

Seven mortgage payments behind with our home in the final stages of the foreclosure process, I was clueless to the real financial disaster in the making as I was just walking away from the loan, as the rest of the nation was doing in situations like mine. I had swallowed this “Wolfe Cookie” as I like to call it in its entirety.

I had it on the good authority from coworkers and colleagues who dabble in real estate that I could just walk away, let the bank own the problem, you’re safe, and they can’t come after you, what you going to do now that you have all that extra income?

Easy words to swallow. (I later discovered there is no “just walk away” regardless what anybody says. Here is a snapshot of the situation that awakened me to the truth of the matter, when I accidentally discover that I am in serious trouble.

With only three months remaining until the auction gavel falls, a near pay off CASH offer appears. Somebody up there must like me. Read on you will see it was quite the opposite. The $475K cash offer is what led me to this epiphany of doom.

My REA informed me of this offer late in July 08, that’s great, wow, still deaf, dumb and blind to the catastrophic train wreck about to happen. The question; what is the actual pay off price of the loan. With seven months of interest and late fees piling up the last 6 months I was unsure what the full pay off price actually was. I won’t go too far into this, but it is worth mentioning.

Three days spent with me and my REA I trying to get the banks attention to inform of this near payoff cash offer. Previously $120K and $160K down were denied a loan. What, were the banks out of money? I would call the lender who referred me to the law firm handling the collections matters who then would refer me back to the lender (law firm handling collections?).

Intensely frustrated as I was doing them a favor, I was to gain nothing from this; well I would be saving my credit, another mistruth. Looking back on it how could I make assumptions on something this important?

Unable to get satisfaction with either the lender or law firm to this simple question, I called a friend and neighbor where the home is located who also happened to be a local broker, maybe he could shed some light on a pay off price as I knew it was close.

Ground Zero!

It was then that my friend and neighbor informed me of the truth. The state I now reside in does not allow deficiency of judgments (DOJ) just as my coworkers and friends informed no hefty judgment to be concerned with however, to my shock and awe my friend drops a bomb that weakens me at the knees when I discover DOJ laws very from state to state, the state of the homes location does allow DOJ that indeed a hefty judgment will be coming at me very soon.

To compound my anxiety I discover not only am I liable for what would be the remaining deficiency of the unpaid balance on the note, but also the remaining deficiency of the “Fair Market Value” of the home or which ever is higher (who said carpet bagging is out of style).

Yep you guessed it, I was fortunate enough to live in one of the areas home depreciation did not hit the hardest, six figures easy I’m in Ohhh Nooo BK! WAIT, the cash offer will saver the day I’m sure of it. Now I am motivated to make this deal happen.

Friends of Wiki, as good intentioned as my coworkers and colleges were, never, never take advice from anyone other than competent professionals, as the road to HAIL is paved with good intentions.

When I emailed the DOJ news to my “Agent”, she politely informed me in her reply she was not an attorney, these types of legal matters should be referred to someone in a legal capacity. 3 points will earned. I don’t know how to say this other than with all caps:

THERE IS NO REQUIREMENT FOR REA (“Agent”) REPRESENTATION IN A SHORT SALE SITUATION

Period!

Now to finally get to the beginning of the negotiations process where I can answer your question using my example. In the beginning of August 08 we finally have the lenders attention confident this cash offer was a no-brainer short sale for the lender, buyer is in a hurry with a 30 day close, sold as is, subtracting REA commissions and various other costs incurred through escrow broken down in the HUD-1 left a deficiency of $34K.

Don’t lose track of the HUD-1 I will explain how it in itself was a primary cause to reconsider my position and the nail that sealed the coffin. Have I confused you yet, it will become clear in a moment.

In order to keep from getting sued I will use first names only. Bring on the lender’s highly trained loss mitigation team who skillfully know how far to go and which lines not to cross; I was tagged teamed by two of the finest, The Negotiators; Julio and Antonio! You got to be kidding me. I asked my “Agent” what the next step was she informed me to give them a call that she had no experience in these types of negotiations. I realized then I was standing alone.

Facing a giant of a lender which research showed (many, many hours of it) that this particular lender was and is one of the most notorious in predatory lending practices. I am feeling that lump in the back of my throat thinking of this next paragraph, I’m 22 years retired military I don’t get emotional easily).

If it were not for the direct involvement of one of the leading contributors of Wiki who as chance would have it answered the phone late on a Sunday evening and gave me insight and comfort as I was no longer standing alone, this new found friend would help me through it all to fight the good fight.

This person will remain anonymous as I don’t want to bother this person again on a Sunday afternoon to ask permission to use their name, although we remain good friends. With out this friend of Wiki’s involvement I would have been doomed. My friend made it clear that I held all the cards as I was the one with nothing left to lose. Allow me to explain:

1. Past due on over 5 months of mortgage payments, irreparable damage to my credit score far greater than BK or foreclosure, a short sale benefits nothing.

2. Monetary gain, this is a short sale, again benefits me nothing, all other parties the lender, the buyer and of course my “Agent” make out like Fat Cats.

 

Knowing all of this I was coached, no warned that these guys would rather commit financial suicide than to cave into my demands, to be prepared for that out come. The demands I was advised to put on the negotiation table were simple;

 

A. Instruct the lender to write off all the deficiency as paid in full with a “Credit Bureau Report” CBR clause (My mentor passed this beauty on to me) (still don’t know what it actually does). The CBR would nullify the lenders ability for the short sale to impact my already damaged credit score. In addition no 1099 to worry about, I walk away owing nothing or I’m BK we all lose. In other words;

 

I’m a man at the negotiation table with a grenade in each hand the pins in his teeth projecting a sardonic smile, but I’m not smiling. Now I know exactly where I stand. Take my terms or we’ll all go down together.

To summarize the final outcome and to finally answer your question: Three words “HARD SHIP PACKAGE” actually two words. Hardship Package (HP) or lack there of, the dummies lost the first one I sent via mail months earlier keeping the house on the market a tad longer.

Julio and Antonio insisted I send again. I let all the cats out of the bag my terms alone told them I was being coached by someone savvy. They set me up on a “super secure” server of the lenders for all further correspondence. I have yet to submit the HP, my “Agent” seems to think I have lost all control of my senses, angrily stating; this is not fair to the buyer to keep them hanging on like this (not fair to the buyer)? Leaning on me hard to get the HP in. HUD-1 submitted, the two BPO’s were in (favorable) all is ready except me and the HP. I almost did it. I’ll take the credit for this one; if it doesn’t smell right don’t bite into it.

I asked myself these questions and came up with one conclusion:

1. Two BPO’s were ordered (I pulled a BPO accession sheet from Fannie on line, isn’t the information age wonderful folks) A BPO is completed by REA “AGENTS” not appraisers. Looking at comps I suppose. They both came in lower than expected in the mid $400K. I looked at the comps myself they did not support the BPO’s, and the lender REP’s would not provide a hardcopy when I requested them.

Why not? (Foreclosure listing last week Sep 08 of the home listed a market value $518K. Not six figures but substantially higher than both verbal BPO estimates. Minimum bid $480, 12:00 pm sharp at the court house 01 Oct 08). They knew I would run if I knew the truth.

 

2. Why would another major lender not a settlement company “The Lender” offer me an 80% forgiveness on over $30K of unsecured debt? Around $10K less than the deficiency owed on the home loan on a “simple phone call agreement. No HP required. Written documented agreement faxed to me the following day. I was in the middle of my second of three installments of $2600 the terms of the settlement agreement and the reason I did not want to send my hardship package to the lender, as my records would indicate a residual of $2600, which I could only pay the first installment after selling a vehicle, tightening our belts so hard and forego paying any other creditors.

It could still be considered FRAUD my friends.

They want your entire portfolio how much does your kid make throwing news paper EVERYTHING, TWO YEARS WORTH……why? To use your package against you at a time you may least expect it. They have easy access to my credit report they can see I’m in trouble, I make a good living, sure if I lived in Kansas (nothing against Kansas beautiful State cheaper cost of living mind you). The cheapest house in the track of homes we live in built in 1963 is $1.3 mill, enough said.

3. I caught Julio and Antonio in at least one deception, one is all it takes; Julio informed my realtor who whole heartily agreed; that if I were to apply for a “small” loan we could make this a full pay off, there would be no 1099 concern. Julio must have thought I was genuinely stupid, small loan my barnacles, with my credit score, 28% with payments sure to put me into BK – not to mention his sidekick Antonio already let it out a week earlier that the lender would not write off a loss, that a promissory note would be drafted for the deficiency at 0% interest, written over the next 50 years would be more likely.

A perfect example of a lender deception, almost as we were friends, these reps are not your friends. The long term no interest promissory note I had indication of already reading of it here in Wiki.

 

4. Why would a law firm be in charge of collections? You can bet your Jolly’s a document was drafted up as soon as they received my file waiting for the hardship package to arrive to fill in the blanks to hand to a judge to know exactly how much of a judgment to go for, to max it out, better off with a BK judge.

Now to finally answer your question.

I refused to submit my hardship packages I’d rather go BK. Julio and Antonio walked away. With the leverage I had, a win win cash offer, saving the lender the law firm fees and the risk of a sale at auction. They did as my mentor warned, they committed financial suicide rather than cave to my demands.

Threats do not faze these guys or at least the two individuals I dealt with belonging to this particular lender. Maybe they don’t want to start a trend, who knows, everyone took a bath except me……

I’m getting that lump again………

“Sometimes the answer lay in front of your nose all along, blinded by fear and emotion refusing to let the power of all things good to take the helm and steer the course”.

There is a happy ending believe it or not.

I became alarmed a day earlier about taxes, surely there was some provision made for this as my “Agent” knew I was tapped. I took a closer at the HUD-1, an eye opening look. Below is a cut and paste from the email I sent dismissing her services.

HHEEErrrreeeessss Johnny!

…If you’re wondering by now what in the world is wrong with Bart? Well I’ll tell you what’s wrong with old Bart is that he smelled a rat when he read the below cut and paste from the HUD-1 this morning. Your agency will be affectionately referred to from here on out as the 700 club.

Why didn’t you mention this, who was representing who, which was I, 701 or 702, Good Grief! Look at 704! No mention of this at all, hiding in plain sight but never mentioned:

700 TOTAL SALES/BROKER’S COMMISSION

701 Commissions to MY AGENTS AGENCY 700 CLUB LLC 14,250.00

702 Commissions to MY AGENTS AGENCY 700 CLUB LLC 14,250.00

704 COMMISSIONS PAID AT SETTLEMENT 28,500.00

No wonder you were pushing me so hard into financial hell, that a lot dough in there, how ironic the 700 club helped old Bart buy that nightmare as well, that be $38.4K of Bart’s sweat and blood given protecting your freedom. Not bad for a minutes work. Not today my friend not today.

(In all fairness this could have been a typo, a fat finger as claimed, but I will never really know for sure. It was enough to get me highly motivated to get my bones moving out of this entire mess, and by the way if I would have moved forward with a short sale $7K state tax bill was coming my way. Who would you rather owe the lender or the state? The state does not forgive in BK).

The happy ending; My current monetary residual is modest $1200 a month with a mountain of debt to pay off, making the most I have ever made in my life inching up to a six figure annual gross. My wife, my best friend has been, disabled for 16 years with me away for almost half of that. We have two minor children whom I don’t really know.

The Solution: Quit the job, happily take in my 73 year old father who needs a place to lite, File Chapter 7 wipe all debt, Antonio and Julio may have some explaining to do, with a combined income of my military pension, my wife’s disability and my Fathers SSI along with moving to a lower cost of living area where nice rentals are going for a grand a month…….guess what…….we are left with the same modest residual of $1200 month without the debt in a better quality of life and I get to stay home and take care of my wife, which I’m now understanding that’s not such a popular idea any longer, be careful what you ask for Love.

NEVER GIVE UP!

Thank you Wiki! And a special heart filled thanks from my entire family to my mentor and friend always who by helping a fellow human being standing alone against giants was reward enough!

Respectfully and Yours Aye! Bart H, OSC(SW) USN ret.

(Folks it would be impossible to make up a story like this, this is the brutal truth non-exaggerated as it happened, and I have the email and other documents I will gladly Submit to the Wiki Staff for verification).