I am going provide a series of blogs on the subject of short sales and loss mitigation.
1. The name of this series will be - Why are the nations largest lenders allowing Realtors to represent sellers in "short sale negotiations". Today will discuss the stealth beauty of the short sale scam as perpetrated by the loss mitigation departments of the largest lenders including lenders like CountryWide and GMAC.
Why are lenders allowing Realtors to represent sellers in mortgage workouts? Lenders require the Realtors to get the seller to sign authorizations which grant the Realtor the authority to represent the seller via the lenders collection department. (Loss mitigation always declares itself to be a collector). I am not sure if non lawyers will remember this but in the past collection departments always required the caller to be an attorney or the debtor. They frequently challenged lawyers to prove their credentials.
Why all of a sudden have these debt collectors changed the their procedures? With one simple authorization the Realtor expands her scope of representation as wide as can be... Tax, bankruptcy, foreclosure, contracts, asset protection, debt collection, pre-foreclosure solutions, accountant and counselor come to mind as just some of the duties a Realtor is implicitly assuming.
In the past bankruptcy lawyers were the persons who negotiated workouts with lenders. Bankruptcy attorneys had leverage against lenders and they knew how to use it.
Today many sellers are being represented by Realtors. Now the lenders have leverage over the Realtors.
For instance lenders frequently request the sellers to sign new promissory notes or they inform the sellers they will release the lien but not they will not release the seller from liability on the note. Attorneys would rarely if ever agree to such a solution. However, many if not most "Short Sale specialists" tell the sellers to go ahead and do the short sale.
The lender gets paid, the buyer gets a good deal, the Realtors get paid, the seller gets screwed - gets very little at best and forfeits a whole lot.
I predict this short sale scam will end badly for the lenders.
Next we will discuss the "short sale package".