I’m writing this post as a reaction to a blog on ActiveRain by another real estate broker who was complaining about a couple of short sales and loan modifications he had interrupted by a foreclosure auction. Each state has different rules so it is ALWAYS a good idea to talk to multiple professionals to get the full view of your personal situation before taking action and this includes talking to real estate pros, attorneys who specialize in short sales or bankruptcy and even tax specialties, CPA’s (for tax consequences), etc.
It has happened countless times since the beginning of the recession and it may continue on for a bit longer depending on the processes in each state and at each bank. What most people (including real estate brokers) didn’t know is that banks are set up in “silo” business models typically and they often don’t have computer systems that speak to each other. They’ve been working on it, but these are ENORMOUS internal projects with a lot of working parts and software programs that were never designed to talk to one another.
I know this because I came to real estate from the software sector where we sold products to the banking and financial institutions – one of their biggest problems were that old mainframes from the 1960’s often couldn’t talk to other systems in their business. And, as banks consolidate they have the additional issue of bringing in new systems and programs/data types that may or may not be compatible with the current system. What complicates it further is that most projects that require combining systems can take up to 2 years to implement and the laws kept changing throughout this period.
Did you know that since August 2007 that in just typical lending underwriting requirements that there are typically about 120 changes per month? Imagine now all the additional pain of all the TARP, HAMP, HAFA, and other programs being layered on top of that as they all came out.
In my constant bid to ask fellow agents to increase their knowledge, I often say it’s not just our job to know what OUR job is, but we should know at minimum the basics of ALL the industries that run ancillary to ours. Understanding how banks are set up is part of it. We can’t just get ticked off and call them terrible people, we have to understand the way their industry/business model works so that we can navigate it effectively. Our clients rely on it.
If you’re working on a loan modification or a short sale with a client, you should ALWAYS ask the people you’re talking to at the loan servicer what internal communications they have with the various departments. People who work in “loss mitigation” may not speak to those in the “short sale” department but sometimes in another bank those may be different terms for the same department.
Groups you may see or hear from during the process are:
1. Loss mitigation – could be short sales, or just collections and may be the group you talk to depending on if your client is in default on their mortgage.
2. Collections – typically going after only those loans that are in active default and usually after the loan is about 3 months behind in payments. Can often be involved in foreclosure process but not always. Their job is strictly to try and get what they can from the homeowner and many people in this department are financially incentivized to get whatever they can regardless of any other process/department your client may be working with at the bank.
3. Short sale – pretty self explanatory, and may include loans in default or in imminent default.
4. Forebearance and Deed-in-lieu – may be a separate group internally
5. Foreclosure – also fairly self-explanatory
