I got this from a friend of mine recently. I think this illustrates a few points. The downturn was created in part by incompetent lenders giving out foolish loans. But its also made worse by the fact that these same lenders and just as incompetent when they are trying to deal with properties headed into foreclosure. And lastly saving these guys with a bailout is kind of foolish. If we save them from bankruptcy these companies are going to make the same mistakes in the future.


Yeah, that’s right. Citi Residential Lending is no fun to deal. They have the most ridiculous and disorganized organization. I just went through a painful process of trying to get a home sold through the Citi short sale program. Four solid offers and nine months later, the home is going to foreclose, and the lender screwed up all the offers.


Short sales are typically thought of one of those win, win, win situations. The bank does not foreclose so they save on lawyer fees & get a better price. Sellers avoid foreclosure which would greatly hurt their credit. And buyers get a home for under market value.


Here’s the story…

1. The sellers got behind on their payments. Why? Because they had a balloon note that exploded, their payments went up, and they could not keep up. I suggested trying to refinance, but with the tight mortgage market, the loans were no longer easy to get if you have less then good credit scores. So, lenders said: “Too bad. We sold you this loan that was bad for you originally. Now you can’t pay. Your credit went down because you could not pay. And oh well, we cannot help you refinance now. So sad.” I guess I am digressing.

2. Okay, so let’s do a short sale. The owner is willing to loose their equity. The lender will take a hit on what is owed to them. And let’s get this sold quickly. I called the lender, and they need a letter of authorization saying I can speak with them about the loan, understandable. So the seller signs the letter, and faxes it back to them in about 2 days. I called to make sure they received the letter, and somehow they don’t have it “in their system”. It takes “3-5 days” for it to show up “in the system.” What the heck? You know they are backed up when a simple freakin fax takes 3-5 days to get uploaded in the system. Okay, whatever, let’s keep moving forward. Or that is what I thought. I went through the cycle of (1) fax letter to lender (2) call to check on it in 3-5 days (3) they do not have it (4) repeat the process. Finally after 5 times, a miracle happened, and it appeared “in the system.” This wasted 3 weeks!!! To put this in perspective, a seller in a typical transaction responds in 24 hrs, 48 hrs at most.

3. Now we have to wait for 2-3 weeks to get a short sale agent assigned. I apparently got one assigned to me, but she never ever responded. I seriously think she came to work, looked at her pile of 200 plus loans on her desk, and figured: “forget it; I am going to going to a movie.” I never once heard a response from her. We had a good offer that I submitted, and after 2 months of no response and me continually calling every couple days, I just had it. I called every possible 800 phone number and left messages asking to get reassigned to a new agent. A new person sent me a fax about 2 weeks after that. At that point, the first buyer could no longer get a decent loan anymore and withdrew the offer.

4. On to offer 2. At this point, I was just so relieved to have a short sale agent who actually would respond to my faxes within 2 weeks that I thought the next offer would go much smoother. We put it back on the market to give those who had been calling an equal chance at making a bid. The best offer was chosen, and it went pending one more time. This was a cash offer and only $6K less than the asking price, an even better offer than the first one. Not really. After over a month of the lender taking its time to get approval, the buyer withdrew because she felt the market had gone down.

5. At this point, I was pretty disappointed. We still had 2 back-up offers so we submitted the next one. It was also cash, but $11K less. I should explain the cash appeal and why lenders should drewl over cash offers. Basically, it means that it will close. The lending requirements for a loan, which change almost weekly these days, will not prevent the buyer from closing. The lender again took another month, and somehow just 2 days before it was set to foreclose, they came through and accepted it. Awesome, the foreclosure was delayed, and the buyer had his inspection. Note that this whole time the market is getting worse, and every month we wait, the more money the seller owes on taxes, which translates to more money the lender will owe if it forecloses, and the higher offer we need to equal that one we got 8 months earlier.

6. Anyway, that buyer withdrew too. We had one more back-up. Lower again, which ended up being $20K less than the original offer. Since the lender will not counter, we submitted a couple offers. We faxed over the last offer from this last buyer 8 days before it was set to foreclose (for the second time). On the Friday before it is set to foreclose the following Tuesday, Citi says the need some info from me that I had sent 3 times already with the other 3 previous offers. Okay whatever, so I faxed that over.

7. Come foreclosure day, I heard nothing. I sent faxes and left messages with my short sale agent, and no response. What the heck? I got one phone call from someone named Oliva from the “home preservation” department or something at Citi. Apparently, they wanted to make sure the property was being kept up. She asked me about utilities, if the grass was being cut, etc. I was like, “Who are you? Did it foreclose or what is the deal?” She seemed to not be aware that it was supposed to foreclose the same day she calls. They even took some photo 7 days ago and were disappointed that the grass was not green. The grass in Austin is not green in most areas of Austin. It has not rained in months, and gee, the sellers really feel obliged to have a green golf course lawn when Citi doesn’t even bother to ever call us back. It was totally appalling! And to top it off, Olivia says: “Oh good. If it is foreclosing, then we can take that off our list.” I was pretty livid. How much more flippant could you be about the very situation that is messing up the economy and screwing over sellers, buyers, and America. That’s probably a little overstated, but truly, if we could get these properties short-saled more efficiently or with any efficiency at all, it would help relieve all these bad loans.