Thursday, June 02, 2011

South Bay-beach Cities Real Estate: Short Sales.. Finally... a lender who gets it

If you have a negative amortizing / pick-a-pay loan issued by Wachovia, World Savings or Golden West Bank and are having difficulties making payments or the home is upside down in value... you might be in for some good news.

A few years back when banks were taking over the world, Wachovia Bank was one of the most aggressive. They took over Golden West and World Savings and Loan. These institutions all had one thing in common.... they all pushed negative amortizing loans. The loans had a number of names but the most popular was pick-a-pay.. You decided every month how much you wanted to pay and if the payment wasn't fully covered then the negative amount was added to the loan balance... Needless to say the crash of 2007 put a stop to these loans but many were not phased out until 2008.

In 2008 Wachovia merged with Wells Fargo Bank. Similar to the Countrywide / Bank of America merger, many people questioned the acquisition and the added financial pressure it brought to Wells. The merger along with a few other items forced the ouster of Wells CEO John Stumpf.

Fast forward to 2011... the toxic loan scandal has pretty much run its course with a lot of causalities along the way. Short sales and foreclosures are common in all markets and parts of the country. Banks are getting a bit better in the way they handle short sales but as unemployment continues on the high side and the housing recovery fails to happen there are still a lot of short sale properties on the market.

Despite pleas from the State and National government officials for banks to get it together and make short sales easier not much has changed in the last 5 years. But that may be about to change.

Wells/Wachovia has about 50,000 properties in LA and Orange County that have negative amortizing loans. These loans were generated by Wachovia, World Savings, and Golden West from about 2004-2008. Most of the loans have balances in excess of the property value. The bank did some number crunching and realized that almost all of these loans will wind up in foreclosure... which is going to cost them a lot of money.

They decided to do something smart and cut their losses. They are ready to do short sales on all these properties with a minimum of paperwork. There are some rules and guidelines but the unlike the rules for most short pays the bank will do a short sale on owner occupied, second homes, and homes that have become rentals. You can be current on the payments. In other words they want to get all the negative loans off the books.

There are a few rules:

1. The property needs to be listed by a real estate company and it has to have a legitimate buyer with a written contract of sale. ( You can start the process without a buyer but the bank ultimately wants the property sold)

2. You need to contact the bank immediately and fill out a 1 page form( You read that right... a 1 page short form is all that is required to start things rolling... there is almost no paperwork)

3. The loan has to have been made by Wachovia, World Savings or Golden West. It must be a negative amortizing loan. ( While Wells Fargo owns Wachovia they are not extending this policy to loans made by Wells Fargo or for loans that are not negative amortizing )

The bank will follow HAFA guidelines. They will give relocation funds to the seller for moving expenses. If you have a lot of assets they may require you to sign a note but otherwise they are going to give you a release of the deficiency in writing ( which means your credit won't take as big a hit and you can get a new loan in 2-3 years).

Wachovia says they are ready to roll on these loans.. so if you have one and have been trying to figure out how to get out from under this may be the solution. Contact Wachovia and your agent to find out more...

***Photo courtesy of Jeff Turner


Anonymous said...

wachovia's short sale program is very old news, but interesting that it's showing up in this high-end market.

Kaye said...

The program has been around for awhile but they are now really pushing to get these loans gone. Not many in Manhattan or Hermosa but a few in North Redondo and in surrounding cities.

Also notice they are not doing this with any loans issued directly from Wells Fargo or any loans that are not negative amortizing..