Just Coasting, But Time Relentlessly Marches On

We are getting close, but nothing is happening.

Where it stands now? Waiting to hear from Bank of America if their investor, Capital One, is willing to meet the unreasonable demands of second mortgage servicer GMAC, representing their investor Deutsche Bank.

I don't even remember if I've ever blogged about this before.

But apparently it's pretty typical in a short sale for there to be more than one mortgage on a property, the first mortgage, and then, usually, a second mortgage or home equity line of credit (HELOC).

Now GMAC/DB should really just sign off and say: OK, we lose, Bank of America gets all the dough. After all, GMAC/DB would get bupkis in a foreclosure. Not to mention the fact that GMAC got billions from the government and DB participated in the AIG bailout, and we're in a national emergency, and it's not supposed to be business as usual, and that any patriotic banker is now supposed to be actually trying to avoid precipitating foreclosures.

Dream on.

But instead, it seems, that GMAC and BofA are playing chicken, and I'm the worm caught in between. GMAC will only take $X. BofA only offered $Y. GMAC counters with $Z. Now BofA has to see if CapOne will take $Z. And that's been another week of waiting.

GMAC should probably be burned at the stake for trying to extract $Z. There are some federal guidelines about this (see HAFA below), which clearly state that second lien holders are only entitled to $3,000.

Well let me tell you, $Z > $3,0000.

And I'm the schmo here. Because when GMAC wants $Z and BofA is only willing to offer $Y, guess who's going to make up the difference.

But I promise, I'm going to hire a blues band and have a party in my basement on the day I move in.

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.