"Strategic default" a griowning problems for home mortgages

fly said:
The hell they do. By that point your credit is already screwed. They can either accept the offer or own it. Which do you think they'd rather do these days?
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'these days' they've got a handle on things, they're short selling the houses to companies they've created and holding them in a shadow inventory while going after judgements. it's really shady what they're doing really...

from the 3 guys i know that do shortsales, 2 years ago they were getting 8/10 accepted in a 45 day period, 'these days' they're lucky to get 2/10 accepted and it's taking a very long time for approval so it's tough to keep sellers on the line, meaning they gotta have cash on hand and buy them whenever they finally get the chance, then find a buyer later on... actually, all 3 guys dont even bother anymore now that banks are basically selling the houses to themselves. my buddy was telling me the other day he got a rejection on a shortsale package he submitted 11 months ago.

banks realized people were making shittons of money doing shortsales and figured out how to keep the profit themselves basically.
 
you also have to prove a major life event, like losing your job, divorce, medical stuff, something... before a bank will even consider a short sale.
 
plot said:
'these days' they've got a handle on things, they're short selling the houses to companies they've created and holding them in a shadow inventory while going after judgements. it's really shady what they're doing really...

from the 3 guys i know that do shortsales, 2 years ago they were getting 8/10 accepted in a 45 day period, 'these days' they're lucky to get 2/10 accepted and it's taking a very long time for approval so it's tough to keep sellers on the line, meaning they gotta have cash on hand and buy them whenever they finally get the chance, then find a buyer later on... actually, all 3 guys dont even bother anymore now that banks are basically selling the houses to themselves. my buddy was telling me the other day he got a rejection on a shortsale package he submitted 11 months ago.

banks realized people were making shittons of money doing shortsales and figured out how to keep the profit themselves basically.
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No one is making a shitton of money on a short sale, as the house is being sold at current market value. That aside...

I think you're looking at it from the wrong angle. You've just been approved for a short sale, but realize that under the current contract that the bank could come after you. Here are your options:

1) Continue with a contract knowing that you could be liable for the balance

2) Let the house get foreclosed on and be liable for nothing

Why would anyone choose option 1?
 
April23 said:
That's expensive and like the lottery tho...rarely will the bank get their money back from a person that does not have any.
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They have money to play with though. It's just business for them. Also two things 1) Lawyers are gonna bill you upfront cause your credit is fucked and you are the defendant. 2) Assets are money, retirement funds are money. If they wanted to crucify you they could force an involuntary bankruptcy.

All this would be better than insurance, because it would make other people wary of strategically defaulting.

April23 said:
Oh and BTW-- judgment.
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whore
 
Yes, but the ones that are around now are the ones who made the cut rather. Stuff is mellowing out and depending on the size of the company spending half a million on what is essentially advertising...

This is even assuming that you get the short sale. If they are only taking cash in hand for short sales >.>
 
fly said:
Can you find that law in the mortgage/real estate code for me plz?
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it's not a code or law that i know of, its a guideline they absolutely follow to a T. it's simply a major part of the short sale process.

banks allow shortsales so they don't have to foreclose on a property, not becuase they dont want the property, but becuase every foreclosure they have signifies a bad loan which means the banks 'credit score' goes down and they themselves lose lending power.

if they do a shortsale, they gotta show their own lenders that it was justifable and they simply didn't just give a bad loan to someone who's situation hasnt changed but can't afford it and never could... makes the bank look like a bad credit risk to it's own lenders.

you gotta remember that banks borrow money themselves in order to lend it to people. if they lose their lines of credit, they're fucked.

now what banks are doing is shortsaling properties to companies they've created so it doesn't effect their lending power, and they're hoping to resale those houses in the next year or two if/when the market goes back up. interestingly enough, when the housing market starts going up again, you're going to see it flooded by this inventory of empty houses all of a sudden and it's gonna slam the market right back down again... but what can you do?
 
how people make money short saleing 101:

1. find person who, becuase of a slumped housing market or a house that's in complete disrepair, has a loan worth more than the actual house. (ie: upside down)

2. get them under contract, fill out shortsale contract, gonna require alot of paperwork from them including a letter stating why they can no longer make their mortgage payments... need last two years taxes, list of all assets, bank accounts, etc. you also submit comps in the area.

3. bank issues a BPO, or their professional opinion on what the property is worth. if it makes sense to the bank to shortsale it, they approve it.

4. bank will agree to take 60-70 cents on the dollar amount of the loan, depending, leaving the person buying the house with 30-40% equity. that person has to pay the bank cash.

5. person turns around and sells house they just bought at 70% value, for fair market value, making $. PERSON WHO SOLD THEIR HOME BECAUSE THEY COULD NO LONGER AFFORD IT *CANNOT* RECEIVE ANY OF THE PROFITS THROUGHOUT THIS PROCESS!

that's oversimplified but that's basically all their is too it.
 
theres ways to do it, but most are bought with cash, then turned around and sold the same day in an entirely seperate transaction to an end buyer with bank financing.
 
Not as much as you might think anymore. Lots of normal everyday people are trying their hands at short sales for their primary residence. Sure, there are people hitting them up for cash, but most of the cash market right now is going after bank owned properties that they can get for much less than market and resell for some decent profit. The post foreclosure market is where the cash flush buyers are making their money, not the short sale market.

After just spending the past 6 weeks doing a shit ton of research on properties and real estate, I picked a few things up.
 
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