Why Gentlemen Prefer Blondes and Banks Prefer…Short Sales
It should come as no surprise that only 12.4 percent of Florida borrowers who are at least two months behind on mortgage payments have entered into trial loan modifications through the Obama administration’s Making Home Affordable program.
The first date
For many who tried to get a Florida loan modification, the process is like a bad first date that just won’t end.
When you first got your loan, the bank picked you up in its nice car and took you to a fancy restaurant. Things were going great, but then halfway through the evening, dinner, like the economy, took a downward spiral. In an attempt to save the date, you turned the conversation to other topics and tried to stay on neutral ground, thinking maybe this bank isn’t so bad. Maybe I’m just too picky.
Checking out the blonde across the room
So you changed tactics and decided to go for the loan modification in an attempt to smooth out the relationship. Except now the bank can’t remember your name, your loan or number, and won’t even consider qualifying you until you are in default. You get rejected once or twice before you wise up. You start sending the right signals, only to find that your bank, like your date, has moved on. The negotiator or customer service agent you have been working with has been transferred, just like your date’s eyes have transferred to the blonde across the room.
Becoming too needy
Although commentators suggest that it is the fault of the bank’s parents because they failed to properly train your lender or give your bank incentive to finish out the evening on good terms, the bank is really just playing the odds that there are many fish in the sea. In their eyes, it is purely economical to look at other options while they are still on a date with you.
Furthermore, the bank is not really interested in the same things you are. While you are looking for a nice meaningful relationship including principal reduction, the bank is only interested in one thing: lowering your monthly payment but keeping you locked to the full amount of the principal. Therefore, saving the relationship through mortgage modification, while a good idea, is not the strongest approach.
A recent study by the Federal Reserve found that Uncle Sam was the best person to train your bank to deal with short sales. Without Uncle Sam’s influence, your bank is so awful that you no longer want to put in the effort to pay your mortgage. In addition, with things like unemployment and sagging real estate values, your bank is simply not keeping your attention throughout the night either. Furthermore, of dates that are saved through modification, studies suggest that 55% of them fail on the second try. Short sales benefit both parties: your bank is free to spend the evening with the blonde as a consolation prize, while you escape unscathed from a bad situation.
Keeping that in mind, your bank has ultimately decided that even if you save the first date through modification, the chances that the second date will tank are pretty high. Thus, the economic incentive for the bank to end the date and take home a sure thing is significantly higher than the risk of going home at the end of the night with nothing. And nothing is what they get if they let the whole relationship run its course into foreclosure.
Breaking up is hard to do…and expensive
There is still a chance for a peaceful break up. The short sale process allows the bank to avoid a losing streak of consistently ending dates in foreclosure, leaving homes vacant and disintegrating. Lenders are out looking for a sure thing, not a long time commitment of paying for upkeep of ex-wives foreclosures.
Although the short sale is not perfect and the banks still don’t handle them as smoothly as possible, to distressed daters it is a welcome relief. Assuming that the banks continue to cut their losses and take what they can get, they too might find that their own losses have significantly decreased by participating.
Relationship therapy…getting help
Anecdotally both Weston Title & Escrow and Oppenheim Law have seen a substantial increase in short sale activity as well as in the success rate of processing short sales.
While the short sale will not keep a failing date together, and you will likely leave the restaurant early, it will allow you to get out from under a bad situation.
Sometimes utilizing a Florida foreclosure defense associated with a short sale is a very effective means of fashioning your own bailout; especially when you know that banks and gentlemen prefer short sales.