Saturday, January 23, 2010

An Open Letter to Rich Fairbank, CEO Capital One

Mr. Richard D. Fairbank
President & CEO
Capital One Financial Corp
1680 Capital One Drive
McLean, VA 22102

Mr. Fairbank:

I am writing to call your attention to a position being taken on behalf of Capital One that could lead to a completely avoidable home foreclosure, a transaction that would not be in the best interests of your shareholders or the financial entities you represent with this mortgage. In this matter, Capital One is being represented by Bank of America as the investor in a first mortgage on a home that is involved in a short sale transaction with Bank of America.

There is no equity in the home and the owners have fallen deeply into financial ruin. Unfortunately, GMAC (as representative of Deutsche Bank and mortgage investors) holds a second mortgage on the property. GMAC is asking for a share of the short sale proceeds in exchange for releasing the lien. I'm caught in the middle, and don't feel I am in a strong position to mediate a fair settlement between two huge financial institutions.

The situation is this:-- I have a contract to buy a house that is destined to be foreclosed. Bank of America is the servicer of the first mortgage. GMAC is servicing a HELOC on the property, which they say is a loan owned by Deutsche Bank.

Unfortunately, GMAC will not accept BofA's offer to settle their lien. Both the first and the second mortgage were originated on the same day as part of the same refinancing in 2005 through now defunct Greenpoint. I contacted Seth Waugh, head of DB in the US, and there was a fast and constructive response. At the direction of his office, GMAC reduced its payoff demand. There's an indication that through the intervention of his office, further compromise is possible.

I have no opinion as to the merit of GMAC's claim -- all I know is that given the current national climate, I would hope that Bank of America and Capitol One could find a way to reach a compromise agreement on this short sale.

Capital One would certainly suffer a much larger loss if there is a foreclosure. In addition to the BofA first mortgage lien, there are liens from the IRS and NY State. Both tax authorities have indicated that they are willing to discharge the lien for a short sale.

It is widely acknowledged that foreclosures promote neighborhood deterioration and further destroy home values. It is national policy to work to prevent foreclosure, and I'm sure it is the publicly stated position of Capital One that foreclosure should be averted if possible.

I hope you will help me resolve this matter in a way that will best serve both your shareholders and the public interest.

I have written to you in hope that your office can intervene constructively in the case. I would prefer to resolve this by working cooperatively with the financial institutions involved in this matter, rather than to escalate my grievance and bringing it to the attention of my congressmen, Senators, and regulatory officials at the Federal Reserve and Treasury Dept.

Monday, January 18, 2010

HAFA Loaf Better Than....


The Treasury Dept. snuck in some new regulations Nov. 20 that people seem to be waking up to.

It's called HAFA -- Home Affordable Foreclosure Alternatives. The regs apply to loans from participating servicers, but not Fannie or Freddie, which will issue separate regulations.

HAFA supposedly takes effect April 5. And I don't see any way in heck that these servicers have any chance whatsover of complying.

Take one of the most basic HAFA guidelines -- banks are required to get back to borrowers within 10 days of the submission of the short sale package. In my case, it took about two months, and that was only after a certain amount of wheel squeaking on my end. No way that's going to happen. I wonder what, if any, penalty can be imposed on banks that take longer than 10 days?

And here's another provision of interest, at least to me. HAFA limits the payment that can go to junior lien holders, i.e. second mortgages. The HAFA regs impose of cap of $3000 in payments to second lien holders. That means big losses for holders of the seconds. Base on my recent experience, this too ain't gonna happen. I wonder what happens to a bank that doesn't follow the HAFA guidelines? I skimmed the guidelines, but didn't see any mention of penalties.

If you want to drill down and read the HAFA document yourself, it's here.

Short Sale National Data

Some interesting short sale statistics from a site called Housing Predictor:
  • Less than one percent of the homes at risk for foreclosure are approved by banks for short sales.
  • Only 40,000 short sales were completed nationwide in the first half of 2009.
  • Only 8-12 percent of the homeowners who initiate a short sale actually succeed.
  • Major banks claim they have added staff to handle the increased volume of customer inquiries about short sales.
  • JP Morgan Chase says it has hired 5000 new employees to handle the flood of calls.
  • Bank of America, which services 14 million mortgages, says it has also invested in building capacity, but the bank is reportedly under fire for outsourcing much of the call center work to India. (I think this may be a spurious allegation -- I haven't ever been connected to an Indian call center during seven months of dealing with BofA).

Saturday, January 16, 2010

Not Alone: Many Face Issue of Second Liens -- Even Alleged Fraud!

Sometimes I think I'm crazy, betting sucked into this short sale deal, putting so much time into it, letting it become an obsession, and experiencing outrage at what's going on here on the fringes of the subprime meltdown.

But tonight I read that this situation with lien holders putting the squeeze on short sale buyers is pervasive -- potentially turning into yet another banking scandal. It might sound esoteric, but this may be happening in thousands and thousands of desperate deals being struck around the country.

According to Diana Olick, writing on the CNBC site (here), there are allegations that major banks, when they are holding second liens, are pressuring short sale buyers into making illicit payments that won't show up on the official HUD-1 closing document. And apparently this is illegal.

The alleged malefactors include CitiMortgage, JP Morgan and Bank of America.

I'm not surprised.

Thursday, January 14, 2010

HAIL TO THE IRS!

You would never think that the IRS would be one of the good guys in this story.

Playing against type, they've been gentlemanly, open, responsive.

New York State has also been easy to deal with.

Why are the private sector bureaucracies we are dealing with so poorly run? I guess executive compensation takes priority over investing in the people and resources necessary to provide decent customer service.

By the way, many people seem surprised when you tell them that it is possible to get the IRS to discharge a lien in a short sale. This is thanks to the agency's scintillating Publication 783. Don't forget to send you request for tax lien discharge to the right IRS office! For that info, I recommend IRS publication 4235.

Wednesday, January 13, 2010

A Big Danke to Deutsche Bank! But Bank of America, Well That's Another Story!

On the run here, trying to keep the shop open, but a quick update.

Deutsche Bank continues to shine as a transparent, intelligent, responsible organization. Not only did the nice woman who answered my email to their top guy in the US help out, but the guy she referred me to, in California, also was a champ. They're doing their best to help.

By the way, although DB is "the investor," DB doesn't actually own the mortgage backed securities that contain the GMAC second mortgage in question. But DB holds the certificate (or something like that), whatever the paper is that would reside with the owners -- who are probably insurance companies or pension funds or hedge funds.

GMAC was basically passing the buck when they said, "we are rejecting your offer because it's unacceptable to the investor." What they really mean is, "we can't accept it because we are trying to do our fiduciary responsibility." Now what it really means is that they probably get some slice of whatever settlements they negotiate, so they want to keep that slice as big as possible.

But to actually get a frank, intelligent, patient individual on the phone to explain all this is a breakthrough.

Now, as to Bank of America. On the one hand, BofA mortgage is trying to avoid losing everything on a mortgage that went south. That's the short sale. On the other hand, BofA credit cards is workinig to spoil the deal because of a unpaid credit card balance by the home owner, a credit card balance that is not in any way secured by real estate.

I FedEx'ed a letter to Brian T. Moynihan, pres. of Boa, and also sent him an email. There has been no response.

And BofA got a bailout.

And Deutsche bank didn't.

Capitalism didn't cause the subprime crisis.

Stupidity did...and also mismanagement, and bureaucracy....and the soul destroying, mindless reign of executives presiding over tens of thousands of oppressed cubicle dwelling minions who do their bidding....

Tuesday, January 12, 2010

Giving Credit Where (subprime) Credit is Due

Winter night descends after a day of progress.

Yes, there are some good people out there who respond when they received emails from members of the insane short sale rabble. I salute them, as follows:

The woman at Deutsche Bank who got into work early and responded to my email right away. The email was addressed (using an email address found by Googling) to a high DB executive. The nice women's email came back to me at something like 8 a.m. DB is reportedly the investor in the second mortgage. They say they're looking into, and will get back to me. If they can even find a single second mortgage buried within the mountain of mortgage backed securities in their portfolios, I'll be stunned.

The woman in the media relations department of GMAC who also responded to a totaly out of the blue email. It's not her job to respond to emails from short sale crackpots. But she did, and she promised to forward my email to the right department. I can't get over it. Faith being restored here.

And other, minor progress. Like getting an alternate fax number from the people at Bank of America credit card litigation support. Their fax machine hasn't been working for two days, they won't give us their email, and we don't have their address. Thanks.

Liens: they don't really make sense, so maybe it's time to challenge the accepted wisdom

And finally, thanks to My Muse. For now I am contemplating the very nature of the real estate lien? What exactly does it mean? How can a credit card company put a lien on a house? A credit card is not secured by real estate. And what if Man A buys a house from Family B, with a credit card lien that was placed on the house because Family B went broke and couldn't pay. If there's no equity in the house, why should Man A owe a cent to the credit card company. anyway?

You could carry that one further and wonder about why a home equity line of credit company has any right to a property that is sold at short sale. Yes, the loan was secured by the house. But if the house goes to a short sale with no equity, shouldn't the HELOC just be erased? The HELOC lost out, that was the risk they were taking. So whys should it be the new home owners headache? Has anyone gone to court on this? Googling provides very little insight. I will research and get back to y'all.

An open letter to Seth Waugh, Deutsche Bank

Seth Waugh
Deutsche Bank AG
60 Wall Street
NEW YORK, NY 10005
USA

Mr. Waugh:

I am writing to call your attention to a position being taken on behalf of Deutsche Bank that represents a troubling example of how financial institutions can engage in socially irresponsible practices that promote home foreclosures. In this matter, DB is being represented by GMAC as the investor in a second mortgage on a home that is involved in a short sale transaction with Bank of America.

There is no equity in the home and the owners have fallen deeply into financial ruin. Yet GMAC is obstructing the short sale by demanding an unreasonable payment for releasing the lien. GMAC will act as a spoiler -- forcing a foreclosure that will in not in any way benefit Deutsche Bank or its shareholders, because Deutsche Bank will recover nothing in the foreclosure.

[I then go into the gory details....from which I will spare you, dear reader]

It is widely acknowledged that foreclosures promote neighborhood deterioration and further destroy home values. It is national policy to work to prevent foreclosure, and I'm sure it is the publicly stated position of Deutsche Bank that foreclosure should be averted if possible. The Treasury Dept. has formulated rules governing short sales, to take effect in a couple of months, that stipulate a $3,000 standard payoff to the second mortgage holder in short sales.

I hope you will help me resolve this matter in a way that will best serve both your shareholders and the public interest. I have filed authorizations from the homeowner and the credit card holder that give the bank permission to discussion this matter.

[more gory details]

I have written to you in hope that your office can intervene constructively in the case. I would prefer to resolve this by working cooperatively with Deutsche Bank, rather than to escalate my grievance and bringing it to the attention of my congressmen, Senators, and regulatory officials at the Federal Reserve and Treasury Dept.

Monday, January 11, 2010

And now, Deutsche Bank, GMAC, FIA and truth, justice, the American way at the IRS

Keep this in mind: if you get involved in a complicated short sale, it's like taking on a second full time job. It's frustrating, draining and infuriating. At least mine has been...

And now, for the news.

Today, slogging through the battlefield mud. Finally managed to move forward at GMAC, progressing from the document packager to the negotiator. But the initial contact was not promising.

GMAC holds the second lien -- for about $200K. BofA, the short sale bank, has offered $3,000 for the discharge of the lien. Sounds paltry, but GMAC would collect nothing in the event of a foreclosure. There's a lot of conflicting information out there about what second lien holders will take in a short sale --some postings indicate that $3K is the norm, others indicate that it's not. Doesn't look like I'm getting lucky -- GMAC doesn't seem to be in the $3K camp.

GMAC has been extremely difficult to deal with. Their system is overloaded: when you send a fax, and call in to see if it's received, they can't confirm if it has or not, and they tell you it takes five business days for a fax to be "entered into the system." I have been trying to reach someone there since January 4.

However, a call to the GMAC executive customer relations number this morning finally accelerated the process (800-627-0128) . I found out that the document assembler we had been talking to had decided that somtehing was missing from the HUD1, so he wasn't forwarding the package. Never let us know, so it was just sitting there. But the call to the executive offices proved effective, and by this afternoon I was talking with my negotiator.

The negotiator was somewhat nasty, brusque, to the point. GMAC would never accept the $3000K. Doesn't matter if it will cause a foreclosure. The reason for the rejection? The "investor" in the mortgage would never accept that amount. The ultimate pass the buck strategy in our post sub prime crazy world. And who is the investor? Deutsche Bank.

So another obstacle presents itself. I'm trying to figure out how to overcome it. Stay tuned.

Thursday, January 7, 2010

POA Continued

Perhaps the greatest pleasure in all this has been getting to know the fine gentleman who lost everything, including the house I'm trying to buy. You hear stories about angry foreclosed homeowners tearing the plumbing out of the walls or eating a bushel of asparagus and urinating on the wall to wall carpeting.

Well not here. I can't believe how nice this guy is being. He's a true mensch. As I said previously, NY State requires it's own very special power of attorney agreement. It has to be signed and notarized by the tax payer, then signed and notarized by the tax payer's representative.

The other, equally burdensome, POA that was enacted in NY State for other POA situations just won't due. Another few days burned up on red tape.

But the pleasure of it was another chance to chat with My Man, the guy with a big heart who lost it all.

Beginning to prepare my brief against Bank of America. Googling which House Subcommittee is supposed to provide oversight. What's the best email address for President Obama? Who's my Congressman?

Calling GMAC, POAs, and Bank of America Credit Cards

When I first entered into an agreement to buy a short sale home, I had no idea. No idea whatsoever. It's now about seven months later. The saga continues. Deepens. Twists. And I'm way to deep to stop now.

I can't tell you this story here, now, in narrative chronological form.

I will take one from the book of how to stay sane, and deal only with what's in front of me, now, today.

GMAC. They hold a $200,000 second lien, HELOC on The Property. GMAC handles short sales the way GM designed cars. There is a four to five business day wait for them to enter faxes into their system! Their loan modification department has odd business hours -- they don't open until 12 noon on some days! Today, Thursday, when they are supposed to open at 8 a.m., all I could get when I called was a recording listing these hours. This is insanity.

Bank of America Credit Cards. The Owner of the Property owed money ($62,000)to a credit card company called FIA, which was part of MBNA, which was bought by Bank of America. This is another lien that must be released in order for the deal to go through (one of many -- more about that in another post). When we started this ghastly business, FIA was being represented by a sleazy, monstrous debt collection company call Mann Bracken/Axiant. Google them. Complaints, law suits up the wazoo. We were negotiating with them. Then, one day, we call, and we're told -- guess what? Mann Bracken has declared bankruptcy. Hallelujah I tought to myself. Bank of America will be easier to deal with. After all, they are the ones who have agreed to the short sale on The Property. Why would they kill the deal?

WRONG. The Bank of America credit card operation has proven to be almost as bad as Mann Bracken. Talk to their representative and you hear not absolutely one trace of concern about causing an unnecessary foreclosure. Bank of America credit cards has absolutely no chance whatsoever of collecting a single dime on their lien, yet they seem to be quite willing to spitefully refuse to discharge the lien.

And, oh yes, Powers of Attorney. You need them to talk to people on the phone. Every company wants a different authorization or Power of Attorney. There is a new New York state statue for POAs. The NY State Dept. of Finance, however, has its own form....yikes!

Do I sound bitter? Am I a crackpot? I don't know at this point.

But it sure feels good to vent.

ADDENDUM:

An Open Letter to Brian T. Moynihan, President, Bank of America


Brian T. Moynihan
Chief Executive Officer
Bank of America
100 N. Tryon Street.
Mail Code NC-1-007-18-01
Charlotte, NC 28255
January 7, 2010
Dear Mr. Moynihan:

I am writing to call your attention to a serious breakdown in the management oversight at Bank of America, a breakdown that involves one division of the company working against another.

This issue is detrimental to the interests of your shareholders -- and in addition, is a troubling example of how financial institutions can engage in socially irresponsible practices that promote home foreclosures. In this case, the foreclosure that is being forced will result in a
loss of revenue to the bank and to the underlying investor in the loan.

[gory details ommitted]

It is widely acknowledged that foreclosures promote neighborhood deterioration and further destroy home values. It is national policy to work to prevent foreclosure, and I'm sure it is the publicly stated position of the Bank of America that foreclosure should be averted if possible.

I hope you will help me resolve this matter in a way that will best serve both your shareholders and the public interest. I have filed authorizations from the homeowner and the credit card holder that give the bank permission to discussion this matter.

[gory details ommitted]

I have written to you in hope that your office can intervene constructively in the case. I would prefer to resolve this by working cooperatively with Bank of America, rather than to escalate
my grievance and bringing it to the attention of my congressmen, Senators, and regulatory officials at the Federal Reserve and Treasury Dept. I will not be willing to standby and experience a huge loss of my resources and to witness a shocking return to business as usual
and anti-consumer practices at an institution that has received a massive government bailout.