Pam Marron Home Lending

Banks Have Discovered More Profit to be Had in Delinquent Loans

UPDATE as of 8/24/12: After talking with the U.S. Treasury, it was learned that servicers can receive fees whether underwater customers are delinquent or pay on time throughout a short sale. to find out if your lender will allow your mortgage payment to be current through a short sale, click here


 

The average scores I see on past short sellers is 680+…. good credit before short sale, good credit after short sale. However, there are ELEVEN MILLION + of past and new short sellers locked out of repurchasing again, DUE TO THE LATE MORTGAGE PAYMENTS REQUIRED BY THEIR LENDERS IN ORDER TO GET SHORT SALE APPROVAL!

Stopping banks from requiring late mortgage payments to qualify for a short sale would allow a huge number of these soon to be and past short sellers to come back into the real estate market.

Banks have figured out that there is more profit in service fees for delinquent loans versus performing loans. This is the reason why banks require delinquent mortgage payments.

However, there is a way to make servicing for on time/performing but underwater mortgage holders profitable to banks during the short sale approval wait time.

Short sale criteria needs to be examined and modified. First and foremost, base short sale on hardship, not the fact that a short seller is making their payment or not.

Then, divide servicing of these short seller applications into two groups.

  1. Those who are delinquent:
    continue to receive all of their servicing fees for delinquent homeowners, which increase the more delinquent.
  2. Those who are not delinquent but are in imminent default (will default if not addressed soon):
    *Profit: Let servicers/investors collect payments made on time as additional revenue.
    *Profit: The government HAFA program can keep the relocation fee paid to homeowners who go delinquent.

Banks…

  1. STOP DUAL TRACKING! Stop the practice of continuing foreclosure proceedings while the homeowner is also being approved for a short sale! Past short sellers don’t even know their credit reflects a foreclosure until we find out on FNMA and FHLMC AUS Findings! This results in more wait for these folks to get back into the real estate market, cost and time to them to fix, and who knows how much damage to their consumer credit before they find out the foreclosure error!
  2. Give these short sellers a letter at short sale closing on your bank letterhead that states: “This loan closed as a short sale. All markings and codes reflective of a foreclosure should be deleted from credit”. And, put it on your letterhead so Experian and the other repositories will accept it!

April 17, 2012 by · Leave a Comment

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About Pam

Since 1985 as a loan originator, highly experienced with automated loan approvals on DU, LP, and with USDA GUS systems, thorough knowledge and use of FHA loans including 203K rehab, conventional loans including USDA, Homepath and rehab, and VA loans. After 27 years, I STILL love this business!

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