SHOCKER!!   Buyer of a short sale doesn’t own the property he just purchased (or does he?).  Seller of the short sale paid off the wrong party (or did he?).

The below email was sent to Neil Garfield at Living Lies.  Sadly this is not shocking at we know of two other lawsuits where the seller and the buyer acted in good faith and sold the property and the money was sent to BofA (and MERS was involved as well) and later the “real” owner of the deed of trust came forward and demanded that the transaction be undone due to a mistaken release of the deed of trust by the wrong party.

What does this mean to a real estate agent involved in the transaction?

Get an attorney involved – preferably BEFORE the short sale closes.  Why?  Quite simply you need to make sure that the transaction is buttoned up tight.   Many of the short sales that involve an attorney and litigation against the pretender lender will require a settlement agreement to be signed at closing (or at least have enough documentation that the seller & buyer have some ground to stand on).

But what does a settlement agreement do and how does it help you as the real estate agent?

First, the pretender lender whose is receiving the proceeds of the short sale “swears” they are the real lender or working for the real lender (like Fannie Mae).  Second, a well crafted settlement agreement will indemnify the seller (or whichever parties are named) – meaning that the lender getting the money has to defend the seller if they are sued over the specifics related to the settlement, i.e. the short sale.

Does the buyer lose the house and does the real estate agent have to give back their commission?

Very likely the answer is no.  But you will have to hire an attorney to fight this battle for you.   The title company should be on the hook for the value of the home – meaning they will either have to pay off the “real” lender or the new homeowner.   The downside is that it could cost more than the commission just to fight this type of suit AND the title insurance is only good for the amount of the policy (if the house was bought for less than full value or thousands of dollars in updates/remodeling has been performed you could lose this amount).

Bottom Line

Short sales and even purchasing foreclosure can be great equity and value builders for the buyers and assist the seller with disposing of a property but a good title company and good lawyer can help you keep this value hopefully keep your sanity and commission.

Seek legal counsel from a real estate attorney and one who has experience in dealing with short sale and foreclosure.

- The Bank Slayer

On the surface this looks like a win for the investors who lost billions when they bought lousy and in many cases FAKE mortgage backed securities.   But the question for Henry Homeowner who is wrestling with his own mortgage woes is, what does this mean to me?  Will I benefit from this “win”?

I have posted below comments and editorial from Neil Garfield @ LivingLies, Christine Riccardi @ Housing Wire, and a related post from the Subprime Shakeout website.

As far as my take…Let’s see the specific 530 RMBS to which this cases was pointed.  If your mortgage is inside (or was supposed to be inside) one of these allegedly held in Trust by the Bank of New York Mellon then you should have a leg up on BofA, as to your rights as a borrower and BofA as the servicer.  We’ll see.

- The Bank Slayer

NEIL GARFIELD COMMENTS & NOTE: The investors put up the money for the funding of mortgage transactions with BOA and other investment banking operations brokering the deal. Now BOA is about to pay the largest settlement to investors so far. The real question is that if the investors were the real creditors, which they were, then the obligation from borrowers should be prorated downward. If BOA is buying these pools that were never filled it doesn’t mean that the pools gain any more credibility as having the assets claimed for the pool than they had before.

And if BOA wants to move into the shoes of the investors they are faced with the same conundrum that the investors had when they decided to abandon claims against homeowners and seek redress from BOA, to wit: do they really want to move directly into the line of fire of a hail of defenses, affirmative defenses and counterclaims for predatory and fraudulent lending? And is there anyway that they can say that their claim was secured when the loans were never transferred by proper documentation or delivery?

This is a classic PR move for Wall Street. This is a fake scenario in which the true liability is being masked by a friendly deal. They are taking hundreds of billions and probably trillions in liability and attempting to distill it down to what appears to be a large a number but in reality is less than 1% of the total liability. This isn’t the end of it even if they want it to be.

But in the meanwhile, brokers and investors will be hearing what they want to hear and BOA stock will inch up a bit.

The reality is that these bonds are worthless  and always were worthless. Any balance sheet item anywhere is a fake if it is based upon mortgages or mortgage bonds whose value is derived from mortgage loans.

The loans were not originated in a standard contractual manner — the borrower and the lender were shown, and each agreed, to two different sets of documents. They treated the loans as if they were transferred but never actually transferred them. So the mortgage was invalid at inception and even if it wasn’t, is not perfected as a lien. The amount due is clearly effected by these settlements, but more than that, we can see that the investors as creditors have clearly abandoned their claims against the so-called borrowers

Investors, creditors stand to benefit from BofA settlement (Housing Wire)

Posted By CHRISTINE RICCIARDI On June 29, 2011 @ 12:33 pm | No Comments

The $8.5 billion Bank of America (BAC^[1]: 11.14 0.00%) settlement with investors of residential mortgage-backed securities issued by Countrywide Financial Corp., which the banking giant acquired in 2008, will have positive ramifications for both creditors and investors, according to analysts throughout the industry.

Bank of America reached an agreement^[2] with Bank of New York Mellon (BK^[3]: 25.44 0.00%), which served as trustee for 530 RMBS trust with a total balance of $424 billion, to reimburse investors who lost money on failed securities.

Barclays Capital analysts said Countrywide deals and other nonagency RMBS will now be more attractive to investors because of the potential return. For the most part, Barclays said, nonagency investors only assume small benefits from rep-and-warranty-related repurchases.

“A less negative (or positive) development on any of the (housing) issues could help alleviate price pressures,” Barclays said. “We believe the headline housing data will improve in the coming months, roll rates will continue to improve and this news should help nonagency prices.”

Barclays analysts expect cash flow from the settlement will most likely filter into the trusts that represent 226 deals involved in the complaint, thereby benefiting Countrywide cash flows, “as these effectively come in as faster prepays and reduce total losses.” Cash flows on Alt-A securities might hit senior mezzanine and even junior mezzanine loans, Barclays said. Subprime bonds should also benefit.

“Deals as part of the settlement could see a direct benefit of 8 to 10 points of additional cash flow,” analysts said. “Even if we assume that the settlement covers all of Countrywide outstanding ($285 billion), the benefit would be at least three to five points of additional cash flow.”

The $8.5 billion settlement represents about 10.8% of the $79 billion outstanding on the list of Countrywide deals repurchased by BofA. The original balance of all these securities was $179 billion. BofA is paying about 4.8% of that original balance, Barclays said.

Moody’s Investors Service said the settlement, alongside its $5.5 billion reps and warranties payout, reduces BofA’s potential exposure to higher losses under a stress scenario. And while BofA’s earnings will undoubtedly suffer in the second quarter, Moody’s expects the bank’s capital ratios to remain above the same period of 2010.

“The costs incurred are at the high end of the range that Moody’s had previously estimated Bank of America might be required to pay to resolve these matters,” said David Fanger, Moody’s senior vice president. “However, following today’s settlement and the announced addition to reserves, Moody’s believes that (BofA’s) remaining representation and warranty exposures are no longer a negative credit concern.”

On June 2, Moody’s placed the banking giant on review for possible downgrade^[4], saying analysts will evaluate the bank’s standalone financial strength to see if credit-risk improvements were made over the past few years. Moody’s expects the settlement will have positive credit implications.

BofA’s overall liability for Countrywide assets could reach $24 billion, according to Barclays based on the percentage of deals in the settlement. However, other securities could be concentrated in cleaner vintages, Barclays said.

Bank of America’s stock closed at $10.82 Tuesday after word of the settlement leaked. Shares of the component of the Dow Jones Industrial Average opened at $11.15 Wednesday, and activity in BofA is helping push the DJIA toward three days of gains^[5].

Breaking News: BofA Close to Reaching $8.5 bn Settlement with
BlackRock, PIMCO (100th Post)
Posted By igradman On June 29, 2011 (12:10 am)

As part of the Subprime Shakeout’s 100th Post (woo-hoo!), I bring you an analysis of some big, breaking news: today, the Wall Street Journal reported that Bank of America was closing in on an agreement with the
investor group led by Kathy Patrick to pay $8.5 billion to settle claims over mortgage backed securities.  If true, this would be the largest MBS settlement to date arising out of the mortgage crisis.

I first reported on this investor effort back in October 2010.  You can find my initial take here, a link to the demand letter sent by Patrick here, and a link to the response fired off by BofA here.
While we heard early in 2011 that the parties would extend all deadlines while they negotiated, we had heard very little about the progress of these efforts until today.

While the details of the purported settlement are sketchy, the WSJ report states that the current investor group includes 22 institutions, including BlackRock, PIMCO, the New York Fed, MetLife
and Freddie Mac, which collectively hold $56 billion worth of mid-2000s vintage MBS.  Though it did not report on any impending settlement, Bloomberg also published an article today on these
negotiations, and stated that the value of the securities at issue was $84 billion, while the original principal value of the securities was $182 billion.  While it is not entirely clear how these numbers line
up, my best guess is that the investor group holds approximately $56 billion of the $84 billion outstanding.

What’s also unclear is how much of the reduction in the value of the bonds at issue is as a result of pay-downs and prepayments, and how much is as a result of the trusts taking losses on foreclosed properties.  Thus, it is difficult to assess what percentage of potential damages from investor claims is being born by BofA under the settlement.  My initial reaction is that, while the absolute dollar amount sounds large, this settlement is ultimately fairly small compared to the potential damages.

This result would be consistent with the consensus among commentators regarding this investor group, including some of the comments contained in today’s Bloomberg article and my initial take on this effort: namely, the investors involved have significant other business dealings with BofA (a.k.a. conflicts), and thus would not seek an aggressive settlement.  At the same time, BofA has exhibited a growing interest in resolving its legacy RMBS liability, and thus would be interested in entering into a sweetheart settlement with a prominent group of investors that would set a precedential ceiling on future recoveries and discourage other investors from coming forward.

Without seeing the terms of the settlement and the details of the group’s holdings, it’s impossible to know what claims are being released in this settlement and how the proceeds are to be shared. For example, if the group is being paid outside of the trust waterfalls, and thus receiving the entire $8.5 billion, then the investors would actually be recovering much larger proportion of their potential damages (while potentially throwing the other investors who did not participate in the settlement under the bus, either by purporting to release their claims, or by making it impossible for those other investors to gain standing to sue).

However, sources have indicated that the settlement funds will actually be paid into the trust waterfalls.  This would be ostensibly more equitable, in that all bondholders would be entitled to receive a share of the settlement proceeds, depending on their seniority. However, query how equitable it really is for a portion of the bondholders (and most likely the senior portion, since these are primarily institutional investors) to set the settlement amount for the rest of the non-participating bondholders, and to receive the lion’s share of the benefits based on their more senior bond position. Whether the investor group could or would engineer such a settlement remains to be seen.

Regardless, the fact that these investors got any money at all out of the nation’s largest bank, let alone a material dollar amount, might actually encourage other investors to come forward.  A settlement of this size would reveal that BofA’s initial rhetoric, that it would fight these claims tooth and nail until they were forced to pay, was just that–empty rhetoric.  For example, BofA CEO Brian Moynihan stated
during the company’s third quarter 2010 earnings call that, “we will go in and fight this.  It’s worked to our benefit to—we have thousands of people willing to stand and look at every one of these loans.”  Further, this settlement undermines BofA’s recent estimate that the cost of its legacy RMBS putback issues would not exceed $10 billion.  BofA cannot seriously assume that this is the only large investor group with which it will have to tangle over defective Countrywide loans.

The simple truth is that investors have significant amounts of viable repurchase and Securities Act claims stemming from their purchase of Countrywide-issued or originated MBS, and BofA will be forced to confront many additional claims by investors in the coming years.  These additional investors might not have the same level of business dealings with BofA and thus might be willing to take more aggressive steps in pursuing reimbursement for its losses.  In that case, BofA’s strategy of creating a lowball settlement to discourage investors from coming forward might end up backfiring and further eroding the already strained capital on BofA’s balance sheet.

Article taken from The Subprime Shakeout – http://www.subprimeshakeout.com
URL to article:  breaking-news-bofa-close-to-reaching-8-5-bn-settlement-with-blackrock-pimco-100th-post.html

BAC Home Loan Servicing and Countrywide are just plain crooks.  While there is nothing wrong with a lender taking control of a situation with an abandoned home (per the powers granted to them in your deed of trust/mortgage that you signed at closing) the rampant mark up of fees and side dealings like this have been out of control for awhile.

While auditing files, we’ve seen a BPO (broker price opinion) charged to the same house 17 times in 20 days.  Give me a break!  Like the bank really sent an agent out to the house 17 times.  It is very clear when you audit a mortgage that many times the servicers are jacking the homeowner up with fees to line the bank’s pockets.

If Bank of America is your servicer you need to closely watch you account if you are struggling with your payments.

If you are a Countrywide customer prior to 2008 you need to have your mortgage audited immediately.

The FTC press release is below.

- The Bank Slayer

Countrywide Will Pay $108 Million for Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers in Bankruptcy

Two Countrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The $108 million represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.

“Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” said FTC Chairman Jon Leibowitz. “We’re very pleased that homeowners will be reimbursed as a result of our settlement.”

According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees – fees that could add up to hundreds or even thousands of dollars. Many of the homeowners had taken out loans originated or funded by Countrywide’s lending arm, including subprime or “nontraditional” mortgages such as payment option adjustable rate mortgages, interest-only mortgages, and loans made with little or no income or asset documentation, the complaint states.

Mortgage servicers are responsible for the day-to-day management of homeowners’ mortgage loans, including collecting and crediting monthly loan payments. Homeowners cannot choose their mortgage servicer. In March 2008, before being acquired by Bank of America, Countrywide was ranked as the top mortgage servicer in the United States, with a balance of more than $1.4 trillion in its servicing portfolio.

When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.

According to the FTC, under most mortgage contracts, homeowners must pay for necessary default-related services, but mortgage servicers may not mark up the cost to make a profit or charge homeowners for services that are not reasonable or appropriate to protect the mortgage holder’s interest in the property. Homeowners do not have any choice in who performs default-related services or the cost of those services, and they have no option to shop for those services.

In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the complaint charges that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans. Countrywide also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts. The FTC alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts, including in some cases via foreclosure.

Settlement Terms

The FTC’s complaint and settlement order name two mortgage servicers as defendants: Countrywide Home Loans, Inc. and BAC Home Loans Servicing LP, formerly doing business as Countrywide Home Loans Servicing LP. The settlement requires Countrywide to pay $108 million, which will be refunded to homeowners who Countrywide overcharged before July 2008.

In addition, the settlement order prohibits Countrywide from taking advantage of borrowers who have fallen behind on their payments. The defendants continue to service millions of mortgage loans, including tens of thousands of loans involving borrowers in bankruptcy and foreclosure. In the servicing of loans, the defendants are permanently barred from:

• Making false or unsubstantiated representations about loan accounts, such as amounts owed.
• Charging any fee for a service unless it is authorized by the loan instruments, by law, or by the consumer for a specific service requested by the consumer.
• Charging any fee for a default-related service unless it is a reasonable fee charged by a third party for work actually performed. If the service is provided by an affiliate of a defendant, the fee must be within limits set by state law, investor guidelines, and market rates. Defendants must obtain annual, independent market reviews of their affiliates’ fees to ensure that they are not excessive.

In addition, Countrywide must advise consumers if it intends to use affiliates for default-related services and, if so, provide a fee schedule of the amounts charged by the affiliates.

The settlement also requires Countrywide to make significant changes to its bankruptcy servicing practices. For example, Countrywide must send borrowers in Chapter 13 bankruptcy a monthly notice with information about what amounts the borrower owes – including any fees assessed during the prior month. The defendants also must implement a data integrity program to ensure the accuracy and completeness of the data they use to service loans in Chapter 13 bankruptcy.

This case was brought with the invaluable assistance of the United States Trustee Program, the component of the Department of Justice that oversees the administration of bankruptcy cases and private trustees. This action represents the FTC’s continuing work to help consumers who have been hurt by the economic downturn.

For more information about the case and the FTC’s refund program, see www.ftc.gov/countrywide.

The Commission vote to authorize staff to file the complaint and settlement was 5-0. The complaint and settlement were filed in the U.S. District Court for the Central District of California.

The Federal Trade Commission is a member of the interagency Financial Fraud Enforcement Task Force. For more information on the Task Force, visit www.stopfraud.gov.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Homeowners & agents nationwide are confused.  What is Equator and how does it impact my short sale?   In this blog let’s examine the negatives and then finally what to do with Equator.

Thinking about taking on a new short sale?  REALTORS take note, Equator is the new “in thing” for Bank of America and now GMAC as well.  What used to be REOTrans has been upgraded and is now the new Short Sale Equator system.  We have been testing as well as using it for months and here is what we have discovered.

The negatives?

1. Internet access required.  The homeowner must create a userid on the system and have regular access to respond and upload docs.  I guess they assume all homeowners have unlimited access to scanners and the internet, but if not they must have extra money to buy what they need, right?
2. Behind the curtain, the process is still the same.  It is really nothing more than an automated hurry up and wait system.   You knock off all the tasks (like faxing, calling, and emailing the old way) and then wait on the bank for someone to be assigned to the account and review the uploaded docs.
3. It’s very impersonal.  The negotiators hide behind Equator and/or use it as an excuse for not responding.  Before Equator, the negotiators resisted giving out their email address but sometimes would and eventually you could have a conversation with a real thinking human being.  Now, everything has to be input into Equator virtually limiting as much as possible the human to human interaction.
4. Unreasonable demands.  The bank can and does take as much time as they want but every communication in Equator concludes with “if this is not responded to within 24 hours the file will be closed.”  Remember the part about “better make sure your seller has constant access to the internet?”
5. Unilateral negotiations.  Counteroffers by the negotiator through Equator are not always “accurate” per management or the investor’s (Freddie, Fannie and others) guidelines.  This leads to acceptance of an offer or counter and then it later being reneged upon.
6. Unfair trade practices.  The negotiator will attempt to reduce the REALTOR’s commission to the “standard” 4% or 5% or refuse to pay for seller’s portion of title insurance or eliminate entirely all title company fees or make unreasonable demands of other lien holders or POAs and HOAs.
7. Escalation improbable.  Not satisfied with a response or feel you’re not being treated fairly?  Please enter your complaint in the following field, include your name, number, best time to call and exact nature of your complaint, any incomplete forms will limit our ability to respond–limit your response to 24 characters.  Ok, the 24 characters part is not true.
8. GMAC has to submit its own files in Equator versus the agent doing it and starting the process.
9. If you like Equator it is not available (currently) for FHA-insured short sales.

- The Bank Slayer

This is an update on Equator.  We now have the top Tips and Trap to be sucessesful versus failure.  CLICK HERE FOR BANK INSIDERS TIPS & TRAPS.

Homeowners & agents nationwide are confused.  What is Equator and how does it impact my short sale?   In this blog let’s examine the positives…up next the negatives and then finally what to do with Equator.

PART 1

Thinking about taking on a new short sale?  REALTORS take note, Equator is the new “in thing” for Bank of America and now GMAC as well.  What used to be REOTrans has been upgraded and is now the new Short Sale Equator system.  We have been testing as well as using it for months and here is what we have discovered.

Let’s start with the positives, in theory.

1. No more long hold times and mysterious disconnects.  In a nutshell, they are pushing the loss mitigation work out of the bank and down to the homeowner, attorney, REALTORS, loss mitigation counselors and anyone else in the loop.  If you have the time, a good scanner and fast internet connection AND the homeowner does as well AND you are really on top of your game this could be reason enough to celebrate.
2. BYE, BYE fax machine and “we never got your fax”.  We used to hear this often during negotiations of short sale and loan mods with Bank O’ UnAmerica.    Their theory is an “upload” of the docs instead of faxing 90+ pages and then waiting for the bank to “scan and file” will streamline the process.
3. The system is online and thus always available.  Provided there are no scheduled, or unscheduled, maintenance windows.  Recall how the old system was always “slow” or “unavailable” at the end of the month?
4. Faster access to decision makers.  The negotiators should be assigned more quickly than before Equator.  This could be a real bonus since the front-line customer service processors  can’t do anything.
5. Faster response time.  Since the bank has less responsibility because they have pushed all the tasks out to you, they should be able to respond more quickly.  Sounds nice doesn’t it.
6. Costs less.  More automation, fewer people and less human-customer interaction are all good for the bottom line, Bank of America’s bottom line that is.
7. Tastes great.  Giving the customer access to the “system” makes them feel more involved and more empowered.  Fake silk feels just as nice as real silk, only it’s not.
8. Since Equator requires the internet, you and the homeowner can surf the net or play online poker while at work and not get in trouble for goofing off since you need to “check Equator” for your next task.
9. If you hate Equator, currently FHA-insured short sales are not permitted to go through Equator.

- The Bank Slayer

You think BoA will write-down your mortgage to what your house is worth?  Maybe.  Then again maybe not.

Friday was a day of rejoicing for many homeowners who saw the press releases touting that Bank of American will writedown your mortgage balance to the actual value of your home.   Hold the champagne.

According to The New York Times, BoA won’t actually write down loans to the value of the property.  Rather (and here’s the dirty secret):

Bank of America executives said the program would work this way: A borrower owes $250,000 on a house now worth $200,000.  $50,000 of that balance would be moved into a “special” interest-free account.

As long as the owner continued to make payments on the $200,000, without fail, every year $10,000 of the money in the special account would be forgiven until either the balance was $0 or the housing market recovered and the borrower once again had positive equity.

The program would be available only to former Countrywide customers (Countrywide was acquired by BoA in 2008) and is by “invitation only.” It is unclear what the application process is or when this program will go into effect.

This is s joke right?   Let’s examine a few problems:

1. How do you score an invitation?
2. Why only Countrywide former customers?  Maybe because Countrywide is on the hook to several state attorney generals for predatory lending?
3. What is the criteria BofA will use to determine when the house “has equity”?
4. What are the tax consequences?

I guess some is better than none.  Let’s just stop now before I really get fired up.

- The Bank Slayer

Continuing the “Toxic Title” issue

The second nasty title cloud appears when homeowners have modified their loan or taken the dreaded “HomeSaver Advance” which was rampant the last few years.

Let’s examine the result of a typical HomeSaver Advanced deal.  Imagine falling several payments behind and now you owe the bank $8,000 in past due payments.  We know most of these payments are mainly interest with a tad of principle tossed in (in the early stages of the loan).  So now you have roughly $7,999 in past due interest.  The bank rolls out the HomeSaver Advance.  You sign on the dotted line, mail it back and “POOF” you are now current again.   What happened?  You just agreed to take the past due payments and convert it all to principle and add it to your loan balance.  It will now show up a second or third lien on your home which will need to be paid off when selling or refinancing the home.  This can quickly erode equity.

What about loan mod?  Ok, let’s see…you borrower the money for the purchase from AmeriQuest, made payments to Countrywide, refinanced with Chase and now make payments to AHMSI.   You fall behind and want a loan modification.  AHMSI rolls out the red carpet for a HAMP loan modification.  You sign away and make your trial payments.  You decide you can’t make the payments and you need to sell.  You get an offer and are ready to go to closing…but wait the Deed of Trust recorded on your home has one of the three previous banks and not AHMSI.   Tack on a new “loan modification agreement” signed by you and recorded by AHMSI saying you agree you owe a huge amount and that it is all owed to AHMSI.

Can you see where this is going?  Did AHMSI deliver to you a copy of the assignment of your Note from your previous lender?  Did Chase release the refinance Note?  These situations can be deal killers for selling the home.

-       The Bank Slayer