Survey: What % Discounts Are Banks Accepting On Mortgages?
Had a long discussion with a loss mit rep at Wells Fargo on weds and after reading between the lines, seems as if they would take approx 18% or so -- rep couldn't be specific, of course...
For the members on this board - would probably benefit everyone if we shared our success / failure stories with the loss mit people.
Since most short sales are predicated on the as-is, fair market value of the subject property... not on the outstanding mortgage balance... I think that your survey would be more useful if you also sought mortgagees' discount to FMV.
Incidentally, Wells Fargo services mortgage loans for dozens of portfolio investors... with each mortgage investor imposing it's own foreclosure/workout criteria, including those mortgagees that would consider a preforeclosure short sale... so in addition to a discount loan to value scenario... it would also be helpful if we knew the type and age of mortgage, and, if possible, who actually holds the mortgage.
Good idea.
I think it fair to add that a handful of second mortgage loan servicers insist upon a dollar amount representing a percentage of the balance.... irrespective of the property's value....
In the area in which I am focusing my efforts: Charlotte, NC -- the "average" foreclosure scenario involves a house 2 years or less in age with either zero or negative equity (upside down: mortgage amount more than market value).
This scenario seems to stem from "easy" lending requirements on the part of mortgage companies affiliated with builders. Add this to the fact that the builders are putting houses up anywhere you look and the laws of supply and demand prove true...
I've come across people approx. 45 days from the auction date for their house to find that they bought their home less than 2 years prior with only $500 (or less) down -- and teaser rates of 3.75 %.... No idea what their credit ratings were like when they bought the house -- would care to guess the FICO # is a lot lower now.
With the above scenario -- almost 90% of the houses that go to the auction block become REOs -- and once these REOs are listed by local brokers --- they will sit (4 months or more -- even if they need only paint,carpet & a few appliances) due to the previously mentioned large supply of new construction.
Just my observation of my local market.
Enjoy the rest of the long weekend.
i have heard from jeff kaller that the least country wide will take is 82% of the B.P.O. on a first mortgage in default. i think they also have a stipulation that the property must be listed for 2 months. they are awfull to deal with. and that most second mortgage holders will take atleast 10% of whats owed to them unless they are persuing the foreclosure. if any one wants to add to this your more then welcome. i know on the last deal we did the F.M.V. was 160k and PCFS took 80k but we also met the B.P.O. appraiser at the house and talked her down. so i dont know what the appraisal came in at. hope this helps.
great - keep them coming.
Which bank is PCFS ?
sounds to me like the best short sale deals will involve fairly substantial junior liens, so you can get a slight discount the first, and a large discount on the junior liens to create the equity
This is simply not a black and white issue "One that can be placed in a box".
Many lenders will accept a short sale to facilitate the sale of a REO or a home facing foreclosure by allowing the mortgage loan to be paid off at a discount from the amount owed.
*There has to be a reason for a lender to do so.
*The number one reason is most lenders do not want to own the house.
*The homeowner has no hope of catching up on his payments, etc.
*That the homes in the neighborhood have dropped in value.
*The home has extensive repairs and they would have to spend money to fix it up.
*The financial climate creates a jump in the number of foreclosures and the lender already has too many homes in their REO inventory.
*How long the REO has been on the market.
Under certain circumstances most lenders will entertain a discount, or short sale or other means of working out the problem.
If we are in a good economy and there are few foreclosures and banks can easily sell any homes they acquire through foreclosure. During those times you will seldom have a discounted offer accepted.
Some investors will disagree with me on this, but a major factor is how much the lender has invested in the subject property will be a determining factor for discount considerations.
There are basically three ways lenders will settle for less than what is owed on a mortgage balance.
*By discounting the loan.
*By a short sale.
*BY selling after the lender has acquired the property through a foreclosure sale.
Different lenders will insist on doing it one particular way or the other. If the homeowner is financially distressed most large lenders have been known to discount. Distressed means behind in monthly payments and a foreclosure notice has been recorded against the property.
Lenders will not normally accept a sales contract that shows your customer is receiving money. And most will not accept a sales contract that shows the contract can be assigned.
They consider several factors like:
*Does the homeowner truly deserve a short sale?
*Is it in the bank's best interest to take a short sale or repossess the house and sell through a realtor?
*Are there any hidden factors, which might affect our ability to recoup a loss assuming a lender must repossess?
The decision to accept a short sale is heavily based upon dollars invested, values, repair costs, realtor commissions, and holding costs.
It's all a numbers game based upon REO inventory, flexibility of the lender, if a 3rd party is servicing the loan, and the big kicker is the demeanor of the rep in the loss mitigation department that you are dealing with.
In my experience the amount of discount has been all over the board. I have purchased from 10 cents on the dollar to 80 cents on the dollar by way of a short sale.
I have tried to average this out per major lender and every time when I get close one of them changes the rules on me.
[addsig]