Friday, March 26, 2010

Epilogue: Short Sales and Frozen Pipes

Renovation on the short sale house has begun, and already I've learned a painful lesson.

The house is in Park Hill, Yonkers, NY, on a cliff overlooking the city, the Hudson River, and the Palisdades beyond. The nine months that it took to close the deal included several months of very cold winter. The heat and electricity were off. In early November, I had asked the sellers, via the realtor, to drain the pipes and winterize the house. The realtor got back to me and said that they told her that they had drained the pipes, although the realtor noticed that there was water in the toilet. The realtor responded by sending another note to the sellers, explaining the details of winterizing, and never got a response. She never followed up about the lack of a response, or reminded me of the importance of winterizing (something that's probably taught in realtor 101).

Well it turns out that they didn't drain the pipes. Not from the cold water. Not from the radiators.

So over the winter, the pipes froze and burst at many points, mostly at elbow joints. About five or six beautiful old cast iron radiators cracked.
So it took my contractor an entire week of turning on the water, finding a leak, repairing the leak, and repeating the process, to restore the houses plumbing system.

I haven't gotten the bill for this yet. And I'm not looking forward to it.

The moral of the story? Don't trust the seller of your short sale house to do anything that involves maintaining the house. And also don't trust your realtor, particularly if your realtor happens to be representing both buyer and seller in the deal. It's up to you to make sure everything that's supposed to happen, happens.

Saturday, March 13, 2010

Short Sales: A Brave New World

Just because my deal got done, doesn't mean I'm going to stop this blog! I still have a few things I need to say.

First off: if you're thinking about a short sale, forget everything you ever knew about buying a house. It's not business as usual. These are new rules. And you'll be making up some of your own as you go along.

Maybe my experience is different than what other folks are seeing. I'm sure in places like California, Arizona, Florida and Nevada, epicenters of the subprime crisis, things may be a bit different than they are here in the Northeast. The volume of foreclosures and short sales is higher, so maybe buyers, realtors, lawyers and title companies have developed fairly standardized procedures.

In my case, there was no standard, because very few of the participants in the deal had ever done a short sale. Not my lawyer(s). Not my broker. Not the title company. My lawyer had never even heard of a short sale the first time I asked him to represent me (that was OK, he did a pretty good job despite).

What I learned, principle No. 1, is that it is up to the buyer to make it happen.

The seller doesn't have much to gain. They avoid foreclosure, and to some very limited extent minimize damage to their credit rating. In my case, the sellers were pretty nice people. They just didn't want to see a house they cared about in a neighborhood they care about get abandoned, boarded up and left to rot while the bank dithered. But still, they pretty much left it up to me -- and I don't blame them.

The realtor. The realtor has a lot to gain -- a commission. In my case, the short sale bank shaved the commission down from 5.5 percent to 4 percent. It's still a pretty good pay day. But it doesn't seem to be enough of an incentive to light much of a fire under a relators. Realtors are wired to do what they do: show houses, place adds, negotiate. Maybe there are some hard charging realtors in subprime ground zero who take the lead on short sales, but around here that was not in evidence. I suppose that the volume of real estate deals in the local market is high enough so that realtors don't have to invest too much time in short sale deals -- if they fall apart, the commissions are coming in from the conventional deals.

Next time: the lawyer.

Friday, March 12, 2010

This is the End

Today at around 1 pm. in a conference room in White Plains, NY, this drawn out fight came to a successful conclusion. We now own the house, in beautiful Park Hill, Yonkers, NY.

Wednesday, March 10, 2010

GMAC: The Worst of a Bad Bunch

GMAC took the day off today on helping borrowers with "loss mitigation" issues: i.e. thousands of desperate borrowers ripped off with subprime loans, facing foreclosure and subsidizing GMAC's bailout with tax dollars.

Call in mid morning, and a recording indicates that the "recovery department" is closed for training, with the exception of two windows: 8 to 8:45 am., and again from 4 to 4:45pm. Well it's 4:13 pm, and this is the outgoing message: "The recovery department is currently not available for incoming calls."

Truly a superbly managed, customer-centric organization!


At the end of the day, someone actually got back to me. I had placed three calls to the corporate headquarters tel. number, where I asked for the office of the CEO and got a person handling "escalated concerns." They tried to contact the person I was trying to reach, and that mus have helped. At around 4:30 - 5:00 pm, I heard from the guy I was trying to reach. He sent me an email that took care of my problem. The title insurance company had asked for a letter from GMAC stating that GMAC had no objections to other lien holders being paid off as part of the transaction.

Monday, March 8, 2010

Barney Frank's letter to Bank of America and three other large banks

I'm honestly not that much of a Barney Frank fan, but I love his recent letter to the CEO of Bank of America and to the three other biggest bank CEOS, scolding them for being greedy when it comes to second liens that are involved in short sales.

Yes, only an obsessed man deeply involved in a short sale would really pay attention to something like this. But I have personally confronted the avaricious posturing of a major institution that is a second lien holder.

In my case, it happened to be GMAC, not on the list of the Big Four. It was GMAC that wouldn't accept BofA's $3000 offer for release of second lien, and it was GMAC that is squeezing a fairly substantial additional sum out of my coffers -- because they can. And GMAC is one of the sickest financial institutions and a major beneficiary of federal bailouts -- to date, not paid back.

It's a good thing that short sales are getting more attention now that we're getting close to the kick in of the HAFA rules in eary April. Why there was even a front page article in the NYT this morning on this aspect of the mortgage mess that has seemed way too esoteric for the general audience.

As to my own quest, which is supposed to end later this week, today was a day of minor progress. A hopeful initial negotiation with a potentially lethal parasitic lien holder. A scramble to obtain a totally unnecessary document that's being demanded by the title insurance company. But the end is nigh, and chances are decent there's going to be happy ending.

Saturday, March 6, 2010

Bank of America, Brian T. Moynihan, and another collection agency

The end is in sight -- but there is a sickening and outrageous final twist that threatens to undo it all.

Bank of America's credit card department had promised that they would reach a reasonable settlement on a credit card debt owed by the owner of the short sale house. But I needed to get the other liens discharged first.

After two months of diligently and successfully negotiating to have the liens discharged, we go back to Bank of America's credit card department with the documents from the other lien holders. And we are told, callously and with no explanation, that the debt "has been placed with an outside agency."

What that means is that they have included this credit card debt in a bundle of loans that they've turned over to a highly disreputable debt collector, one of the sleazy, fly-by-night "law firms" that do the dirty work for supposedly legitimate (taxpayer-supported) institutions such as Bank of America.

This is a devastating setback. I had come to place my trust in Bank of America, because they at least have a mechanism in place that allows consumers to bring problems to a team of customer service reps who work in "the office of the chairman and chief executive." I've been working with one of those reps, and have come to trust him.

But when this crisis hit yesterday, he was nowhere to be found. It seemed that no one with a conscience or a brain was on call.

I still have faith that this will be resolved. I dashed off a letter to Brian T. Moynihan, president and CEO, both via email and Fed Ex. I'm hoping that Monday will bring better news.

Here is the open letter to Moynihan, with some details omitted:

Brian Moynihan
Chief Executive Officer
Bank of America
100 N. Tryon Street
Mail Code NC-1-007-18-01
Charlotte, NC 28255 March 5, 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. Unfortunately, this is the second time I've written to you about this matter. After I first contacted you on January 7, the matter was taken up by the customer service team in the office of the CEO, and appeared to be on the route to be equitably resolved. Today I learned that these efforts to resolve the matter have been undone.

The situation, specifically, 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. The short sale is at appraised market, and Bank of America has approved the short sale.
-- A division of Bank of America, FIA Card Services, has placed a lien on the house for an unpaid balance by the current owner.
-- In order to close on the house, I have requested a lien discharge from FIA Card Services. After I first contacted you, a representative of FIA, and a representative from the executive offices, stated to me and my attorney that if we were able to obtain lien discharges from the other lien holders on the property, that Bank of America would release the lien or at the very least accept the same terms offered to the other lien holders. We have obtained lien discharges from the IRS, NY State, Allpoints Capital and GMAC (servicer of the second mortgage). However, when we contacted the credit card division yesterday, we were told that the debt has been placed "with an outside agency."
-- We had taken it on good faith that Bank of America would honor the agreement made by the credit card division and others at BofA, and we have invested a good deal of our resources to satisfy the bank's requirements for a discharge of the lien. It appears that the bank has abrogated that agreement.

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 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.