Posted by: Jillayne Schlicke

Jillayne has many years experience in the lending industry and has a unique inside perspective on real estate. She currently provides continuing education for real estate professionals through her company CE Forward.

167 responses to “A Look at WA SB 6337 “Protecting Short Sale Sellers””

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  1. ARDELL

    RE: Kary L. Krismer @ 87

    I make the assumption Kary, that the Numero Uno “outcome” is that the person needs a place to live…a roof over their head. In most cases that means they have to RENT IMMEDIATELY. Forget long term. What happens as to securing replacement housing immediately after the short sale, foreclosure or bankruptcy, is more important than what happens over the long haul.

    In that case “homeless” is the worst possible outcome. Not everyone can go home to Mommy.

    The three most often used criteria for not being able to secure a rental are:

    1) Eviction in the past
    2) A Felony on your record
    3) A Bankruptcy

    That is why I rate Bankruptcy an F, and worse than a Short Sale or a Foreclosure. This based on fact vs my personal opinion as to better or worse.

    If you are a “Distressed Homeowner”, knowing that you can rent after losing/leaving the “owned home” is most likely your number one priority when deciding which option to take. Can’t own for awhile is never as bad as can’t own OR RENT right now.

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  2. Kary L. Krismer

    RE: Ray Pepper @ 100 – Years ago I went to a CLE (attorney clock hour course) where the attorney was describing deposing real estate investors who were involved with illegal schemes. They were more than willing to testify as to what they had done, and were even proud of it, because it’s what they were taught to do by someone who also didn’t have a clue it was illegal.

    And as I mentioned, that one agent more recently was proud of how much money he was making off of unrecorded real estate transactions, and how numerous they were.

    Stated differently, I’m not convinced what you’re describing is legal to do.

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  3. Kary L. Krismer

    By ARDELL @ 1:

    The three most often used criteria for not being able to secure a rental are:

    1) Eviction in the past
    2) A Felony on your record
    3) A Bankruptcy

    That is why I rate Bankruptcy an F, and worse than a Short Sale or a Foreclosure. This based on fact vs my personal opinion as to better or worse.

    I’m pretty sure the third one isn’t true, at least at most places, although that could depend on the market at the time. A recent bankruptcy is in many ways an advantage for a landlord. They won’t be held up by a new automatic stay, and their tenant won’t be deciding whether to pay rent or credit cards.

    I’m not sure the second one is even legal, at least in Seattle (there was legislation proposed at one point that would make it illegal to discriminate against felons).

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  4. Ray Pepper

    RE: Kary L. Krismer @ 102

    Kary, I strongly urge you to attend a Vestus, Data Snap, Evergreen, or the many different investment companies that are at The Trustee Sales each week. In fact you can attend their free dinners on Tuesdays.. Partners and investors come and go while entering business relationships that are beneficial to both parties. There are many Attorneys, Investors, Lenders, Title, Escrow, Landlord service Companies, and both buyers and sellers at these meetings. I think when you understand the Trustee Sale Investing process better you will see what is actually going on out there AWAY from the MLS system. It will better round you as an individual to help your Buyers and Sellers.

    Please attend a few before assuming everything is “illegal”. Then after your research please post what is illegal specifically. We all understand risks that are involved when entering any transaction and how the risk rises exponentially when you accept a partner but as for illegality please do your DD first before firing the weapon!

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  5. Kary L. Krismer

    By Ray Pepper @ 62:

    <If your credit score is not above 640 (I believe 620 now) they will NOT lend you the funds UNLESS you "partner up." Partner up refers to 2 individuals where one may have the cash and the other has the good credit. The home is bought and prior to engaging in the transaction the deal is made between the two parties. Many choose to use a friend or family member. If the person with the cash has nobody they will seek out an investor partner for you that will sell the property to you at a future date at an agreed upon price. Many times the investor partner wants 5k for exp upfront….The investor partner has little risk because its your money that has already been placed down on a greatly reduced priced property…..But, I must say this.. 98% of the time this is done with two (prior friend-family) partners one usually needing the other..

    As I noted before, I don’t have enough details to reach a conclusion, but the highlighted portion is what seems very suspect. It only applies to people in financial difficulty (those with low credit scores). The “investor” has little risk. The goal is to have a person live in a house by buying it from the “investor” at a prearranged price.

    If you did something like that with a house the buyer was already living in, it would likely be illegal. But without knowing all the details I can’t say.

    Just going to a seminar where they teach you it’s okay is not going to convince me. Read my prior post about what the attorney at the CLE explained. Illegal schemes are often taught. My favorite–periodic automatic pre-determined price reductions on short sales was something taught at clock hour courses.

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  6. Ray pepper

    RE: Kary L. Krismer @ 105 – But Kary do you not want to even get more educated on the product before drawing assumptions? I hardly call them seminars more of a dog snd pony show but they would love your company. They would answer all questions and concerns and the joy is u never have to pay 1 penny. Just free education.

    Because we r in a decade of unrelenting trustee sales it should be required attendance so all agents understand the trustee sale process so they can pass this info on to homeowners that may find themselves in thus dilemma.

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  7. Kary L. Krismer

    RE: Ray pepper @ 106 – Not really an area I wish to get into, so no I’m not really interested in attending.

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  8. Pegasus

    Washington Real Estate Agents spreading the word about short sales

    A highlighted statement: “Credit experts will agree that neither a Short Sale nor a Foreclosure is favorable to your credit or credit score, however, the impact of a Foreclosure is much worse.”

    Additional comments from the “#1 Short Seller Team in the NATION”……When there are no late payments on your mortgage, your credit score is generally not affected. It is possible to maintain a high credit score by completing a Short Sale without missing payments on your mortgage and other bills. Please be aware though, that your lender will still report that a Short Sale was done. So, while you may not see your credit score drop if you continue to make payments through the completion of the Short Sale, you’ll still likely have your account marked as “paid in full for less than the full amount” and/or “settled.”

    http://www.sscalculator.com/faqs-view/does-a-short-sale-effect-my-credit/

    Anyone that is not a real estate agent see a problem here?

    “Contrary to what many homeowners believe, a short sale can have the same devastating impact on a credit score as a foreclosure. “If someone is unable to repay their mortgage, regardless of how that turns out, that failure to repay the mortgage is highly predictive of future risk,” says Craig Watts, a spokesman for Fair Isaac, the company that calculates the FICO score, the score most commonly used by lenders. A short sale, a foreclosure and a deed-in-lieu, which lets the borrower transfer the property deed to the lender and walk away from his home, have the same impact on your score because they are all regarded as serious delinquencies. “When an account goes to foreclosure or a short sale, that’s as severe as it can get,” Watts says.”

    http://realestate.msn.com/article.aspx?cp-documentid=20773062

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  9. Kary L. Krismer

    By Pegasus @ 8:

    http://www.sscalculator.com/faqs-view/does-a-short-sale-effect-my-credit/

    Anyone that is not a real estate agent see a problem here?

    You mean your selective quotation of a webpage?

    Why didn’t you quote this: “It is difficult to gauge how much damage will be done to your credit score when comparing a Short Sale to Foreclosure.”

    Or this following: “We strongly advise you to work with a Credit and Credit Scoring Expert for more specifics on this topic, and ways in which to improve your credit after the Short Sale is complete.”

    Interestingly though, you also didn’t quote this from the second link, and that seems to directly support what you’re saying:

    The impact on your score will depend on what shape it was in before the short sale or foreclosure. If your credit was good — say you had no late payments before the short sale and your score was in the 700s — your score could drop by 200 points, Watts says. Your score will begin to recover after a year or two, but how soon it gets to its previous level is going to depend on how you handle your credit in the meantime.

    I wonder though, how many people go through foreclosure and end up with a credit score above 500, which would be required to be better than the more than 700 less up to 200 referenced in the quote. I don’t typically deal with credit scores, so I don’t know how low they can go.

    Also, how many short sales are there without a default prior to the sale? Is this just largely an academic debate?

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  10. Pegasus

    RE: Kary L. Krismer @ 109 – One,.. you are a real estate agent…two…. you are twisting trying to justify comments that appear to be false or at best contradictory. My point continues that the short selling process is highly abused and with the most highlighted comment saying emphatically while highlighted in red above all other comments says that ” the impact of a Foreclosure is much worse.” when compared to a short sale is misleading at best and FICO says that is just wrong. It is just part of the industry misleading homeowners. It falls right in line with the industry’s other misleading statements over the years. Surprisingly there is no advised schedule of automatic $10,000 price decreases on listings every two or three weeks and advice on stopping your mortgage payments yet that seems to be common advice given to short sellers these days. Other sites claim that short sellers can often buy a home with FHA financing right after a short sale when the normal requirement is three years and exceptions to that are rarely done. It’s a new feeding frenzy for the real estate industry and unsuspecting short sellers are getting their clocks cleaned but of course they deserve it even if they don’t know any better, right?

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  11. David Losh

    RE: Ray pepper @ 6

    Oooh, oooh, I’ve attended Ray, and Kary is correct. There are many people there engaged in criminal activity. Plenty of idiots are paying up to be involved in one scam or another.

    There is plenty of very bad information in this comment thread.

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  12. David Losh

    RE: Pegasus @ 110

    A short sale is granted for hardship cases. If you have money you are expected to pay the deficiency. The bank collects all you financial information, and determines your eligibility.

    Some agents lie to the bank. Some people pretend to have a hardship. One short sale expert provided a form letter for you to send to the bank.

    That’s fraud.

    In foreclosure you just send the house back, or you wait for the bank to take it back. The foreclosure may also be due to a hardship, but it appears as though you did nothing to communicate with the bank, or ignored them for an extended period.

    The short sale makes it look like you did something for a reason.

    Both are bad, but the next lender is the one to decide.

    I also took exception with Jillayne when she was giving short sale classes. The Real Estate industry should have stayed the heck out of short sales, or left them to people who knew the differences in hardships.

    In my opinion millions of short sales should have been foreclosures. That would have had more of an impact on the Real Estate market, for the better.

    The second part is that people paid premium prices for short sales. Just because properties sold for 30% below peak, or last sales price, that didn’t make them a bargain. Those properties may well be coming back because the Real Estate industry was propping up prices.

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  13. David Losh

    RE: Jillayne Schlicke @ 113

    What decision? You either qualify for a short sale, or you don’t. You then decide if you want to go through the process.

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  14. David Losh

    RE: Jillayne Schlicke @ 14

    Already fixed. That was a long comment, but it was on point.

    I stopped doing short sales in 2008, number one, because of Real Estate agents who had very bad information. I’ve always done short sales, but agents are just massively misinformed. I don’t think your classes helped. Sorry.

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  15. Pegasus

    RE: Jillayne Schlicke @ 113 – Simply my suggestion is that most sellers contemplating a short sale or a foreclosure should pick the foreclosure. There are a few rare exceptions to that but in general the public is being bilked by the real estate industry…..AGAIN! Most short sellers are getting bad and misleading advice from real estate agents. Claiming the real estate websites and articles are not updated with current info to excuse the false info is a canard. Shame on YOU. People are being told that a short sale is better for their credit, that they need to stop making mortgage payments to get the banks to go along with the short sale, they need to do large automatic price reductions, etc. etc. They are being lied to in order for the real estate agent to get a commission and the poor rubes are going to pay far more than that commission.

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  16. David Losh

    RE: Jillayne Schlicke @ 117

    Wait, I forgot, you must remember Continental Mortgage, now Home Street? maybe they’ve been sold.

    In those days you could actually stand in a loss mitigators office and watch the process. Another buddy of mine worked at WaMu in loss mitigation, up until the end.

    Banks have policies, and procedures for short sales. There is no gray area, there are no new laws that change the way short sales are processed. The file needs to be signed off, for being complete.

    My buddy went over to Chase after the purchase. What stalled the entire process were idiot agents trying to get something over on some one without having a complete file.

    You are making it sound like a decision of a seller. The seller either fits the policies of the bank, or they don’t.

    If the seller fits the policies of the bank yes, the bank can report what ever they like to the credit bureaus. Chase actually sent one of my clients a letter thanking them for their business. Five years later they do have an over 700 FICO.

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  17. Kary L. Krismer

    By Pegasus @ 10:

    RE: Kary L. Krismer @ 109 – One,.. you are a real estate agent…two…. you are twisting trying to justify comments that appear to be false or at best contradictory. My point continues that the short selling process is highly abused and with the most highlighted comment saying emphatically while highlighted in red above all other comments says that ” the impact of a Foreclosure is much worse.â�� when compared to a short sale is misleading at best and FICO says that is just wrong.

    I think you’re reading too much into what I said. I was agreeing with much of what you said, but pointing out the site wasn’t as bad as what you were indicating (and that the other site supported what you were saying).

    I have real problems with the implication if not outright claim on the agent’s site that the credit score won’t take any hit if you do a short sale without a default. I don’t know that is false, but it’s highly suspect. I would also question how a real estate agent would know that. I don’t typically know the credit scores of my clients, and I really don’t know their credit scores six months after doing a transaction with them. It’s not something I have direct access to while working with them, and there’s no reason I would know that information afterward.

    On the other hand, I have a hard time with your claim that they are the effect would be the same, and the reason for that is credit score numbers are a black box science. In addition though, it’s apples and oranges because the person going through a foreclosure would tend to have a lower score at the time of the foreclosure because of the 8+ months of being in default. As noted many places, how far you fall with an event is dependent on where you start, with higher scores falling further. What you would have to do is somehow start with two people who were not in default who had the same credit score and then check their scores afterward, where the mortgage was the only thing adverse and their other credit lines were similar. You’d also need both mortgage creditors to report things with similar accuracy. That would be very difficult to do, and once you did that you couldn’t be assured two other similar people would be treated the same way.

    But finally, again I don’t consider the drop in credit score to be all that important. That wouldn’t be the primary reason I would go one route or the other. I would look more at the effect on getting credit in the future, based on current standards.

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  18. Kary L. Krismer

    By Pegasus @ 18:

    RE: Jillayne Schlicke @ 113 – Simply my suggestion is that most sellers contemplating a short sale or a foreclosure should pick the foreclosure.

    I might possibly agree with that, but it certainly wouldn’t be based on effect on credit score.

    The biggest advantage of a foreclosure is getting to live rent free for 8+ months. If you need a bankruptcy anyway, you could probably easily stretch that to almost a year, even if the bank is doing everything as quickly as possible. That’s a huge advantage to foreclosure.

    The biggest disadvantage of a short sale is having your house on the market. That is a royal PITA, and given your low chance of having a sale actually close, it makes enduring that PITA a questionable decision. Then, once you get an offer, it may be some time before you know whether or not the bank will waive the deficiency. Again a huge negative, because after all that work you may want to back out.

    But it is all very fact specific to each debtor. If for example the debtor was high income, had relatively little debt but had both a first and a second, and the short sale would pay off $20,000+ of the second loan, then maybe going the short sale route would be better. And I do think it would be better for higher income people in general who do plan on buying again in the future.

    One final point. For years I’ve complained that creditors don’t distinguish between Chapter 7 and Chapter 13 debtors. You have one person who just walks away from their debt, and another who either pays it all or pays for at least 3 years. The latter should clearly be given some sort of advantage in getting future credit, but it’s very seldom that they do. This is another area where some should be given credit for taking action to help with an issue, but in this case they do actually seem to be given that credit–if not with the credit score, with what is important–getting a future loan.

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  19. Kary L. Krismer

    By Jillayne Schlicke @ 113:

    Another reason why, IMO, home owners needs a neutral third party to advise them on all the possible consequences of a choice with long term results. A real estate broker is not neutral.

    I think it goes beyond being neutral. People tend to prefer what they are familiar with.

    It’s really hard to find attorneys that are familiar with the implications of short sales, loan modifications and bankruptcy. Someone who does a lot of bankruptcy may think loan modifications are not worthwhile, and visa versa. I attribute that to not being familiar with the other, because they could make money doing either if they were familiar with both.

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  20. Kary L. Krismer

    RE: David Losh @ 11 – To be clear, I just indicates suspicion and doubt about such programs. I had not expressed an opinion that they were criminal or illegal in any way, only concern that they might be.

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  21. The Good Egg

    A friend of mine just sent me a link to this and I wish I had become aware of this dialog earlier. I have just spent the last hour reading all of the posts and I am amazed at the amount of misinformation and vile commentary being spread.

    In the end I think many of you are missing the forest for the trees.

    Short sales are not some sort of activity that can be defined in a cookie cutter sense. What has been mostly missing from this dialog is the dynamic of whether the upside homeowner is upside down to just the 1st or both the 1st and 2nd and by how much, whether they can afford the payments and what this upside down homeowner needs to do to take care of their family.

    Forget hardship, don’t over think “strategic default” and stop the moral play that these homeowners entered into a contract and therefore are “morally” responsible to make good on the debt they incurred! That is complete BS!

    For starters I would recommend reading the book titled “Underwater Home” by a well-respected University of Arizona law professor Brent White. He does a far better job of articulating the basis for any homeowners “moral” right to undo a financial contract that is no longer in their best interests than I can.

    http://www.brentwhite.com

    Credit scoring, foreclosure versus short sale, all of these are very complex issues and cannot be defined in black and white terms. My firm helps real estate agents and homeowners negotiate short sales with the banks and I can generally tell you that it isn’t always pretty!

    Please realize that our current state of affairs was built on one massive Ponzi scheme and these “banks” couldn’t have cared less whether any of these loans were in the borrower’s best interest. For that I also defer to more articulate sources and would recommend to anyone who hasn’t already seen it that they check out the Academy award winning documentary “Inside Job”.

    http://www.sonyclassics.com/insidejob/

    If a homeowner finds themselves upside down in their home and whether they can afford the payments or not realizes that they could live in the same property for half the cost they have some hard decisions to make. Nothing in life is simple. All of this requires an individual assessment of multiple dynamics and then a proper course of action.

    The only general benefit that I will hang my hat on (for fear of being chastised in the public square LOL) is that a short sale CAN be a unique opportunity to settle on a large 2nd mortgage whereas simply letting the house go to foreclosure is potentially stupid as it does nothing to clear the subordinate debt and you then end up with a foreclosure on your record and the 2nd still chasing you for the balance.

    My last comment, as I realize I am taking up too much blog space, is that there is also a common misperception about who the “bank” is. Just because you send your mortgage payment to B of A, Wells Fargo, Aurora Loans, etc… doesn’t mean anything as 95% of the time these entities are acting only as “servicers” and the true owner aka “investor” on the loan is probably a Texas pension fund or school district in Norway who unfortunately bought the crap that Wall Street sold them during the bubble.

    These “servicers” are practicing their own brand of fraud 2011-2012 in that they will churn a distressed property for as long as they possibly can as their costs and fees are skimmed off the top by virtually every “Pooling and Servicing Agreement” (PSA) in existence allowing them to perpetrate a new version of the same fraud they created in the bubble!

    When you wonder how their fax machines can eat 7 different submissions of the same short sale package remember this simple truth…

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  22. Pegasus

    RE: The Good Egg @ 125 – Let’s not forget contrary to your obvious bias for personal financial reasons of short sales versus foreclosures with a large second that the remaining second after a foreclosure can also be negotiated successfully especially if the party waves a potential bankruptcy under the noses of the second holders. Its being done every day but make sure you don’t tell anyone. Of course there are some that a bankruptcy is not an option for because of their wealth, occupation or income. In that case they can afford to pay the second off over time as they well could do the same after a short sale. Stop with the smoke and mirrors to justify short sales. A foreclosure currently results in about one to two years of free rent that can be saved to pay a second if needed. Of course if a foreclosure is done there won’t be all those negotiator fees and real estate commissions.

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  23. David Losh

    RE: The Good Egg @ 125

    What the heck? Of course you should be jailed, or in some form of arrest. Your activity, simply based on your extremely misleading comments here, and based on your business model is an out, and out theft.

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  24. Kary L. Krismer

    By Pegasus @ 26:

    RE: The Good Egg @ 125 – Let’s not forget contrary to your obvious bias for personal financial reasons of short sales versus foreclosures with a large second that the remaining second after a foreclosure can also be negotiated successfully especially if the party waves a potential bankruptcy under the noses of the second holders. Its being done every day but make sure you don’t tell anyone.

    We’re getting pretty far off track here. This legislation is about trying to help people who did a short sale that still owed the debt afterward. Either because they couldn’t negotiate a release or because they didn’t even know that was an issue. I don’t really see a reason to help the former, and I think there are better ways of helping the latter group.

    Foreclosures are better for some than short sales. This legislation doesn’t do a thing for them, or affect them in any way.

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  25. Kary L. Krismer

    Look what I just found! A government entity misleading consumers! ;-)

    Be aware of the impact on your credit score The impact of a short sale on your credit score depends upon a variety of factors, including late or missed payments. A short sale may appear on your credit report as “pre-foreclosure redemption,” “paid in full for less than full balance” or other similar term. It is possible that a short sale will have a different impact on your credit than a foreclosure or deed in lieu of foreclosure (or any other outcome). But, beware that once you miss mortgage payments, your credit rating will be severely impacted.

    http://www.dfi.wa.gov/consumers/education/home/short-sales.htm

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  26. Kary L. Krismer

    RE: David Losh @ 27 – Did I miss something in post 125? Perhaps you could set forth what you saw.

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  27. Pegasus

    RE: Kary L. Krismer @ 128 – We keep getting off track because of the disinformation that keeps appearing here about short sales. I think the public would be better served in finding out why this proposed law is really being proposed at all and who is behind it. The proposed law is a mess in progress and I doubt it would go for long without being challenged by those that own contracts that were signed years ago if they choose to. It also will compound the difficulty in closing a short sale as the true owner of the contract maybe in a trust or should have been placed in one and the ownership can be disputed. It may make a mortgage signed in Washington State less attractive to own in the future and make the transaction more costly for consumers. After all most mortgages get sold to investors and pension funds. Will they have to exclude Washington State mortgages from investor pools? I truly believe that the true reason for this law’s proposal is for it to be used to convince more innocent homeowners to do short sales while the true risks and detrimental nature of short sales are glossed over. I don’t think it will do anything for those that have already done one to their own detriment.

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  28. Pegasus

    RE: Kary L. Krismer @ 29 – The key word is “possible”. That allows the writer to say anything and not be responsible for the true intent of the comments.

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  29. Kary L. Krismer

    By Pegasus @ 131:

    RE: Kary L. Krismer @ 128 – We keep getting off track because of the disinformation that keeps appearing here about short sales. I think the public would be better served in finding out why this proposed law is really being proposed at all and who is behind it.

    I really think it’s a misguided attempt to deal with a problem that doesn’t exist. Someone thinks that sending a 1099-C indicates the debt was written off. It doesn’t. But because they think that, they think it’s unfair for the banks to pursue the debt after sending the 1099-C.

    The proposed law is a mess in progress and I doubt it would go for long without being challenged by those that own contracts that were signed years ago if they choose to.

    It would be nice if the legislation had retro-activity provisions so that it wouldn’t take as much litigation to figure that out. This is effectively shortening a statute of limitations, so my understanding is it could be retroactive to any past transactions where they would still have time to act (ones less than 3 years old). Whether it’s retroactive at all though is an open question.

    It also will compound the difficulty in closing a short sale as the true owner of the contract maybe in a trust or should have been placed in one and the ownership can be disputed. It may make a mortgage signed in Washington State less attractive to own in the future and make the transaction more costly for consumers. After all most mortgages get sold to investors and pension funds. Will they have to exclude Washington State mortgages from investor pools?

    I think it will make closing a short sale more difficult, but for the obvious reason that the bank won’t want to possibly give something up. I don’t buy arguments anymore that are based on differences in state law and banks’ willingness to make loans. Look at all the different collection rights after foreclosure in the different states. That seems to make no difference at all in the availability of loans. Stated differently, I think those arguments are typically made by banks to get legislation passed, or to prevent legislation from being passed, but in reality I don’t think they care.

    I truly believe that the true reason for this law’s proposal is for it to be used to convince more innocent homeowners to do short sales while the true risks and detrimental nature of short sales are glossed over. I don’t think it will do anything for those that have already done one to their own detriment.

    Possible, but I think it’s just misguided consumer protection legislation.

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  30. Pegasus

    RE: Kary L. Krismer @ 133 – Most consumer protection laws are drafted or influenced by the people the consumer needs to be protected from. As far as mortgages costs varying from state to state because of differences in laws that is normally addressed by pricing. The less protection the mortgage holder gets the less he will pay for the mortgage. That cost will be passed on to the consumer either through a higher interest rate, loan terms or fees. It just not may be readily apparent to the consumer but it is going to be there in one form or another.

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  31. Kary L. Krismer

    By Pegasus @ 134:

    That cost will be passed on to the consumer either through a higher interest rate, loan terms or fees. It just not may be readily apparent to the consumer but it is going to be there in one form or another.

    You would think, and so would I, but I’m just not seeing that.

    Have you seen anything suggesting there’s a cost or interest rate difference between states which are pure recourse and the so-called non-recourse states? You would think that difference would be huge, but I’ve never seen anything indicating a difference.

    Oh, and I would agree regulations and consumer protection law usually benefit those regulated. There are some exceptions, however, such as laws requiring carbon monoxide alarms in houses. I’m not fully behind that particular law, but I really doubt it was passed to benefit the manufacturers of such devices, because I don’t think any are made in Washington.

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  32. Pegasus

    RE: Kary L. Krismer @ 35 – You would see the difference in a pool of mortgages that contain mortgages from different states. The value accorded to each mortgage all other things being equal would be different. If the pool were to be privately insured it would definitely affect the cost of that insurance. I suspect after the bankers get publicly lashed some more it won’t be long after that the bankers convince everyone that non-recourse mortgages have to go as they are too costly to handle. It just a bad time to bring it up when your hand has been caught in the cookie jar so many times recently. The fact that we have government entities(tax payers) doing most of the insuring right now makes these differences less noticeable.

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  33. Robert Smith

    RE: Kary L. Krismer @ 30
    David Losh @ 27, I’m wondering the same thing. What exactly in post 125 do you believe qualifies as out and out theft? Strategic default by a consumer? Corporations and banks do it all the time. Hec, even the Mortgage Bankers Associate did the same (see http://www.ritholtz.com/blog/2010/02/mba-walksaway-from-hq/).

    So it’s ok if a “virtual entity” does it but not a consumer who is held to some hire moral standard — held there by the same people the created this nightmare?

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  34. David Losh

    RE: Robert Smith @ 137

    You don’t need that guy to stratigically default. You don’t need that guy for a short sale. As a matter of fact a lot of these guys, by reputation, can hinder your short sale.

    For a short sale the bank, the lender, supplies you with a package they want to see. You fill it out, and send it back. The seller, the Principle, has to do everything.

    These people are looking for free money. There are thousands of these people all talking the same game. The company this guy is promoting is one of the most prolific at advertising to any one, and every one.

    His comment is loaded with bad information, and the web site is ten times worse.

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  35. Pegasus

    RE: David Losh @ 138 – Thank you David for your honest opinion.

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  36. David Losh

    RE: Pegasus @ 139

    You actually did a good job here.

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  37. Robert Smith

    RE: David Losh @ 38RE: David Losh @ 38
    I think you dramatically overestimate the ability of most consumers to help themselves out of this situation. With the banks it’s like loan modifications all over again — it depends on which bank and how whether they are cooperative or out to truly screw the consumer (and some of them really are, like IndyMac – check out http://youtu.be/ssl5yb7FewA ).
    Just because you have the knowledge, background and perseverance to do this yourself doesn’t mean that everyone does. You may not need the services of someone like Nest Financial, but having seen more than a few friends and now one of my nephews go through this — companies like this are serving a niche of customers who are quite grateful for their service and insight.
    I commend you for your knowledge that you apprently feel that everyone should be able to do this on their own — but you’re basing that on your personal knowledge and not what the average consumer knows/understands.

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  38. David Losh

    RE: Robert Smith @ 141

    Oh, but I am basing that on the consumer. I know many people in the short sale, foreclosure mill. They all have the same stories of the guys who are guiding them. Those guys do nothing. They keep coming back with another story about how the consumer needs to do more, so these guys can get paid. They do nothing. They create drama so they can show they are worth the fee.

    No one can negotiate a short sale. It’s numbers, it’s just numbers. The consumer either has a hardship or they don’t. Charging thousands of dollars for nothing seems like theft to me.

    Now why isn’t there a $500 Short Sale? $500 is as much as the process is worth, and that there is generous. It’s filling out paper work at the direction of the consumer, who has a hardship, or they don’t.

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  39. Kary L. Krismer

    By David Losh @ 38:

    You don’t need that guy to stratigically default. You don’t need that guy for a short sale. As a matter of fact a lot of these guys, by reputation, can hinder your short sale.

    I would agree on the strategic default, but not on the short sale. You do need a good short sale negotiator in most instances. The exceptions might be that new BOA program or a small local bank.

    That said, a lot of short sale negotiators charge obscene fees. There are also some real estate agents out their illegally (IMHO) offering short sale services to other agents.

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  40. The Good Egg

    I am choosing not to participate in the zero-sum game of flame wars in the Comments section of a blog post.

    For those of you who just can’t resist, I leave you with the words of Barry Ritholtz:

    Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

    (and you know who you are)

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  41. Pegasus

    RE: The Good Egg @ 144 – That’s the kind of post people make when they are exposed and have no reasonable reply other than to dodge the issues and facts with baloney. You poor picked on baby. Whaaaa! Hopefully you now take the time to clean up the trash and disinformation on your own web site that is misleading at best. Nice try but somehow the truth prevails in spite of you. Thanks for previously posting nothing but a self-centered advertising piece that has little to do with reality.

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  42. Scotsman

    Found this chart over on Doctorhousingbubble.com It shows the number of short sales increasing while foreclosure sales fall in selected cities. Hmmm.

    http://www.doctorhousingbubble.com/wp-content/uploads/2012/01/distressed-home-sales.png

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  43. Kary L. Krismer

    RE: Scotsman @ 46 – That’s true in Seattle too, although I don’t think January’s numbers are the best example of that.

    Vague reference to statistics from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

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  44. David Losh

    RE: Kary L. Krismer @ 143

    There is no negotiation of a short sale. It’s numbers. It’s the number the lender will accept. If it were a negotiation then all list prices of short sales would be $1. The buyer would make an offer, and the lender would negotiate to a price it will accept. That’s not how it works.

    The lender is asking for a BPO, the list price is set according to sales data, and in that is the number. The lender will either accept or not, based on the circumstances of the hardship.

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  45. Kary L. Krismer

    RE: David Losh @ 148 – David, I don’t really want to get into this with you again. You’re probably right that with some banks they’re so slow and inefficient that there’s no negotiation because there’s not enough time to get a second response out of them, but that’s not true of all banks. But there typically is negotiation even if it’s not on price items. It can be on what items are approved to be paid out of the net proceeds, or negotiations between two or more banks as to sharing the proceeds. Maybe you would prefer the term short sale coordinator, because that is also part of what they do.

    If it was that easy to do, escrow companies would be finding a way to do the work and charging extra.

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  46. David Losh

    RE: Kary L. Krismer @ 149

    It is that easy, and yes, escrow could do it, but that would be a burden.

    An agent could coordinate the thing for about $500. It’s stupidly simple process, that starts with the hardship. The seller needs to submit a financial package, including the CMA, that we hope corresponds with the BPO. Verification of the hardship helps.

    It’s a stupidly simple process that the Real Estate industry seized on to make it overly cumbersome to justify fees.

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  47. Kary L. Krismer

    By David Losh @ 150:

    RE: Kary L. Krismer @ 149

    It is that easy, and yes, escrow could do it, but that would be a burden.

    An agent could coordinate the thing for about $500..

    Not without committing a licensing violation (RCW 19.146.020(1)(e)), but that leads off into a whole different area of short sale abuse.

    http://apps.leg.wa.gov/rcw/default.aspx?cite=19.146.020

    Being an attorney I could possibly negotiate short sales for a fee (the statute is unclear). I have zero interest in doing that, because it’s a lot more work than what you realize.

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  48. David Losh

    RE: Kary L. Krismer @ 151

    As a flat listing fee of $500.

    The seller, the consumer, contacts the loan servicer, and asks for the hardship package. The consumer fills out tha package, and faxes it back. The file is assigned a number. The first, and foremost question is if the hardship is acceptable. If yes, then the property gets listed.

    The seller, the consumer should make best effort to pay on the mortgage. If that is not possible they should consider foreclosure, or deed in lieu of.

    Now this is where the Real Estate Industry has made a mockery of this process. It’s a short sale at Fair Market Value. It’s a part of over all inventory. The problems are when agents think this is some wind fall for low ball offers.

    If the process is played fair, there are fewer problems. It’s just number, and hardship. Making it more complex than that is unfair to every one.

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  49. Pegasus

    RE: David Losh @ 152 – You are forgetting that most sellers need some help in fabricating…oops..drafting their hardship letter so that the bank will accept it.. They also need someone to tell them to stop making their mortgage payments. Once the sellers do that they can afford to pay those short sale negotiators big bucks. /snark

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  50. Kary L. Krismer

    By David Losh @ 152:

    RE: Kary L. Krismer @ 151

    As a flat listing fee of $500.

    That would be illegal under the statute I cited, unless you’re proposing that’s the entire cost of the listing for the listing agent, which would make that quite the deal!

    As I indicated in the post you responded to, you’re getting into a whole different area of short sale issues. Some agents are acting as short sale negotiators for a fee, sometimes nominally being a co-listing agent as a ruse.

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  51. Kary L. Krismer

    By Pegasus @ 53:

    RE: David Losh @ 152 – You are forgetting that most sellers need some help in fabricating…oops..drafting their hardship letter so that the bank will accept it.. They also need someone to tell them to stop making their mortgage payments. Once the sellers do that they can afford to pay those short sale negotiators big bucks. /snark

    And that someone cannot be a real estate agent acting solely as a real estate agent (e.g. not also an attorney or licensed loan officer).

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  52. Kary L. Krismer

    I’ve had this as an open tab for about 2 days now. Just realized it might be better than citing the statute.

    “Real Estate licensees must be providing real estate brokerage services for the transaction in order to negotiate a short sale on behalf of either party to the transaction. Real Estate licensees may not charge any additional fee above the normal and customary commission to provide short sale negotiation services.”

    http://www.dol.wa.gov/business/realestate/docs/shortsales-licensees.pdf

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  53. Pegasus

    RE: Kary L. Krismer @ 155 – Let’s talk reality. You have agents saying and doing all kinds of things in the short selling process that they have no business doing. Other than a high profile case or two where are the enforcement goons? Rules or laws are no good if they are not enforced or are chosen only to be selectively enforced. its pretty easy to watch an agent lower the price on a schedule and agreed amount of say $10,0000 every few weeks or months. That’s really easy to track. If someone called the short sellers I bet almost everyone would say they were being told that a short sale is so much better than a foreclosure. I would also bet that most of them would say that they were told to stop making their mortgage payments by either the agent or the “negotiator”. I would also bet that most would say that they are being told how to claim a hardship especially when there isn’t really one. Reminds me of the good old “liar loan” days. Of course only the loan applicant was responsible even though everyone was telling them to lie including the agent and the banks certainly knew the chance of repayment was close to zero. /snark

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  54. David Losh

    RE: Kary L. Krismer @ 156RE: Kary L. Krismer @ 154

    Yes, a $500 listing fee. What’s the problem?

    The consumer does the short sale paper work. If they lie, if they are coached to lie, then any “release of deficiency” would be void.

    So the agent has an interview. The agent asks what the hardship is, and determines, by experience, if it is a viable hardship. If not, the agent moves on. If it is a valid hardship the client calls the servicer, and asks for a short sale package. The client fills out the package, with the truth, and faxes it back. The agent, with a letter from the client, calls the Loss Mitigation Department to introduce themselves, and vouches for the validity of the package. The agent does a CMA, then lists the property. The servicer does a BPO, and the agent, and loan servicer can compare notes.

    There is no game here. There is nothing, absolutely nothing distressed about a short sale other than Real Estate agent drama.

    It’s business as usual done by professionals, which there are very few of in Real Estate.

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  55. Kary L. Krismer

    RE: David Losh @ 158 – You do realize that the seller is going to want to have an estimated payoff. How do you expect the seller to prepare that?

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  56. Kary L. Krismer

    RE: Pegasus @ 57 – Lots of those things are problems. I agree. Part of the problem is short sales are relatively new in this volume, and the system is very slow to respond. It took over a year for agents to realize the liability issues on second mortgages (or even first mortgages). That’s the problem with agents acting as attorneys.

    I still think though you’re focus though is too narrow. There are reasons someone may prefer a short sale to a foreclosure (and visa versa). You seem too set on foreclosure being a better option for everyone, as opposed to some. You should become a state legislator and sponsor bills like the one we’re discussing to force your position on everyone! ;-)

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  57. David Losh

    RE: Kary L. Krismer @ 159

    You are missing the point. You are by passing the hardship aspect and going on like a short sale is some choice to be made, it’s not. The seller either has a hardship, or not. A listing agent can prepare a Net Proceeds.

    It’s just not hard. It’s a simple process. It’s slowed by agents who are trying to force a square peg into a round hole.

    I also suspect that the legislation is in response to the Real Estate Industry wishes rather than reality.

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  58. Pegasus

    RE: Kary L. Krismer @ 160 – Never said a foreclosure was the best or only option for everyone but if we eliminate the misconceptions, distortions and outright lies, I think we would see shorts sales become a very, very small percentage of sales which should be their proper place. We have an industry going out of control again and once again the regulators and the industry will do nothing to stop it. That would be bad for business and if it blows up in the future, which it will, the industry will just blame the sellers. “They should have known better.” “They(sellers) should not have lied on their hardship letters.” “They are deadbeats.” “They signed off on the sale.” “They need to take personal responsibility for their own actions and stop blaming others.”

    Every short sale that I have looked into has been done with the sellers getting a whole bunch of bad information and not one of them so far should have ever been done. Why is that? A simple solution is to contact all of the sellers for the truth. How hard would that be? It’s not being done because it would hurt those that are benefiting off the backs of others through deceit and that might damage revenues. We can’t allow that no matter what it costs in the future to straighten it out.

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  59. Kary L. Krismer

    By David Losh @ 61:

    RE: Kary L. Krismer @ 159

    You are missing the point. You are by passing the hardship aspect and going on like a short sale is some choice to be made, it’s not. The seller either has a hardship, or not. A listing agent can prepare a Net Proceeds.

    It’s just not hard. It’s a simple process. It’s slowed by agents who are trying to force a square peg into a round hole.

    I also suspect that the legislation is in response to the Real Estate Industry wishes rather than reality.

    That would be like saying that bankruptcy attorneys are getting in the way of people with debt. That they can just file their own bankruptcies without consequence.

    As to the last sentence, the reason for the legislation is what Pegasus is complaining about. Agents giving misleading and bad information about short sales. Also somewhat about what you’re complaining about, agents taking advantage of the situation.

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  60. Kary L. Krismer

    By Pegasus @ 62:

    RE: Kary L. Krismer @ 160 – Never said a foreclosure was the best or only option for everyone but if we eliminate the misconceptions, distortions and outright lies, I think we would see shorts sales become a very, very small percentage of sales which should be their proper place. .

    They are a small percentage of sales. Typically about 7-15%, depending primarily on the volume of other sales. (Percentages from NWMLS sources, but not compiled by or guaranteed by the NWMLS.)

    I agree fewer people should be trying short sales. Part of the blame for that has to be placed directly on the banks not communicating what they’re willing to do. But yes, part of it is due to sellers getting bad advice from agents and others.

    There are too many bankruptcies too, in part due to people getting bad advice from attorneys who file bankruptcies. There are too many medical procedures performed, in part due to patients getting bad advice from doctors. There are lots of examples of that type of thing.

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  61. Jill Schlicke

    Hi Everyone,
    I heard that this law passed late last night.

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  62. Kary L. Krismer

    By Jill Schlicke @ 65:

    Hi Everyone,
    I heard that this law passed late last night.

    I don’t know what you mean by that. The bill Tim wrote about didn’t go anywhere. The competing bill I mentioned (2614) passed earlier this month. Perhaps the Governor signed it last night?

    The bill has changed significantly. It’s now just a three year statute of limitations to sue after a short sale. There are also a number of changes to the mediation law which I haven’t had time to review.

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  63. Kary L. Krismer

    RE: Jill Schlicke @ 65 – 2614 was signed on the 29th, so that’s apparently what you heard about.

    http://www.governor.wa.gov/billaction/2012/default.asp

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