Latest -- Banks Still Run by Morons

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Latest -- Banks Still Run by Morons

Mark N.A
Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes

So I get a call from one of the brokers I use and he tells me about this ‘great duplex’ foreclosure that started out at $199k, then worked its way down to $149k whereupon an investor bid $85k. Which the bank refused point blank.

Fast forward a few months later and several price drops to $99k and the bank is screaming at this broker to find the investor who originally bid $85k. Well that investor’s gone but I’m around. So I take a look.

Well, during these long months on the market the roof starts leaking, the a/c above the ceiling overflows condensate, the ceilings start falling, the wallboard gets all wet, mold grows, vandals break windows, and fire ants invade the interior walls (this is slab-built). Did I mention the increase in drive-by shootings as this neighborhood suddenly worsened?

So I’m not bidding anything near what the bank thinks this wreck is worth, and no one else is, either. And brother, this property ain’t fixing itself up alone any time soon. Pretty soon it will be boarded up by the city and scheduled for demolition at the bank’s expense. Like a number of others I have watched.

Point being this is still TYPICAL BANK BEHAVIOR around here. And this particular bank has over 160 REOs here in NC, just one of several states where it does business.

Eventually the pendulum will swing the other way, probably too far over, I believe. But it will also probably bring along some wonderful bargains.

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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
16y

Two things going on here. First the banks are trying to satisfy new and revised regulations being handed down on an almost daily basis by government bureaucrats. Secondly, banks with their huge overhead and high break even costs are trying to find an efficient way to dispose of low priced properties. Very frustrating for us investors to deal with. We are used to handing over our cash and getting title to property. This works great in a capitalistic system. In our new socialistic system, government sponsered institutions (such as banks) must now consider all social directives, i.e, how the sale of the property impacts the neighborhood, if all protected groups have a "fair" shot at purchasing the property, if some public housing group wants that property, etc. Welcome back to Roosevelt era liberalism.

Private Mortgage Financing Partners, LLC
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  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y

    Oh, Mark. So typical. I have so many stories like this as well. The strangest one was when I bid on a SFR $17,000. The asking price was $24,000. The bank turned down my offer with no counter. Two days later, the house disappear from the MLS. Two weeks later, the house reappearEd, listed with a different agent for $13,000. It was on the market for about two days and was sold. Go figure...

    0Reply
  • Mark N.A
    OP
    Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
    16y

    I'll tell you what I figure with that deal, Eddie -- it was either COLOSSAL STUPIDITY... or a little good ol' boy behind-the-scenes wheeling and dealing was going on.

    Either possibility being a very rare thing here in the South..... NOT........

    1Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    16y

    I've bought about a half-dozen REOs in the past year for LESS than my original bid...

    Basically, I put in an offer, got rejected, waited for the price to drop, put in a lower offer, got rejected, blah, blah, blah, until finally I put in an offer that was accepted...each time LESS than the original offer...

    I've purchased multiple REOs for nearly $20K less than my original bid on the same house in the same condition...

    And only once did a bank come back to me to ask if I was willing to resubmit my original bid before dropping the price...

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
    0Reply
  • Peter Giardini
    Rental Property Investor · Baltimore, MD · Member since 2009 · 624 posts · 559 votes
    16y

    I agree that this is one of the strangest situations I have ever seen.

    I have tried to figure out what would motivate a bank to follow this predictable path not once but multiple times.

    Maybe it is just wishful thinking on the part of the lenders... as they all seem to still have their head in the sand regarding any sustainable recovery and home prices stablizing let alone increasing.

    0Reply
  • Demos Loizides
    Real Estate Investor · Dale City, VA · Member since 2008 · 317 posts · 77 votes
    16y

    There heads aren't in the sand, but somewhere where the sun doesn't shine. Oh, and they're breathing deeply.

    1Reply
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    16y

    Two things going on here. First the banks are trying to satisfy new and revised regulations being handed down on an almost daily basis by government bureaucrats. Secondly, banks with their huge overhead and high break even costs are trying to find an efficient way to dispose of low priced properties. Very frustrating for us investors to deal with. We are used to handing over our cash and getting title to property. This works great in a capitalistic system. In our new socialistic system, government sponsered institutions (such as banks) must now consider all social directives, i.e, how the sale of the property impacts the neighborhood, if all protected groups have a "fair" shot at purchasing the property, if some public housing group wants that property, etc. Welcome back to Roosevelt era liberalism.

    Private Mortgage Financing Partners, LLC
    WebsiteView Page
    2Reply
  • Mark N.A
    OP
    Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
    16y

    You've kind of depressed me, Don, with your explanation of the new Socialist REO system.

    Then again, J Scott has filled me with a bright new determination to fight past bank rejection until my bid is finally low enough.

    1Reply
  • James Hiddle
    Altus, OK · Member since 2008 · 2k+ posts · 690 votes
    16y
    Originally posted by NC Mark:
    You've kind of depressed me, Don, with your explanation of the new Socialist REO system.

    Then again, J Scott has filled me with a bright new determination to fight past bank rejection until my bid is finally low enough.


    666 posts your post is evil NC :mrgreen:
    1Reply
  • Mark N.A
    OP
    Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
    16y

    Seems so recent that I was merely half-evil (333).....

    0Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y

    It could be something to do with their books. Most banks are scared s**tless of the MTV (Mark to value). As long as they have it on the books, their assets are considered base on the original value therefor, they desperately try to sell it as close to the original price. The people who work at those REO departments, are bank employees. They have to justify to their boss every sale. If they list it too low, they might be kicked, so they play it safe. If they list high and then gradually reduce the price, they document "price reduction based on lack of demand". Some kind of CYA.

    2Reply
  • David Breitzmann
    San Francisco, CA · Member since 2009 · 171 posts · 24 votes
    16y

    The action-arm of this post is "Where do you bank?"

    Many are now taking action to essentially remove their funds from the coffers of these megoliths. Ally is one insitution offering rates which larger lenders are hard-pressed to match.

    As the "buying public," our words must follow with the root of democracy - action. Complaining while banking at BoA, Wachovia and etc seems to be quite counterintuitive.

    0Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y

    Banking at certain institution and lending from certain institution are not necessarily the same. There is an advantage banking with big institution and that it convenience. Access to abundance of ATMs and branches (Especially if you travel a lot), along with a better online service is something small local banks often don't offer. However, smaller bank may offer better and more flexible loans.

    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    Right Eddie! Investors really need to establish banking relationships with several banks, ot one. No one bank can serve all the needs, especially those that investors require from time to time.

    As to banks not accepting the first low offer, I can also see this, especially in a smaller bank, as saving face. They are going to have to admit that they made a loan with insufficient collateral and poor lending practices! Our Bank make a mistake like that? Why, we are never off that much! LOL Bill

    1Reply
  • Brian Wilkinson
    Real Estate Investor · Aurora, CO · Member since 2009 · 15 posts · 19 votes
    16y

    This video is for EVERYONE. Especially anyone wondering about the "magic formula" of working short sales:
    http://www.thinkbigworksmall.com/mypage/player/tbws/23088/1153419

    -Brian

    2Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by Brian Wilkinson:
    This video is for EVERYONE. Especially anyone wondering about the "magic formula" of working short sales:
    http://www.thinkbigworksmall.com/mypage/player/tbws/23088/1153419

    -Brian


    PRICELESS!!! What the heck is going on here? Does anybody care about those Teflon Goldman Sachs (Too big to fail) guys? How come nobody investigate it?
    0Reply
  • Jeff TumbarelloPro Member
    Real Estate Broker · Fort Myers, FL · Member since 2008 · 1k+ posts · 323 votes
    16y
    Originally posted by Brian Wilkinson:
    This video is for EVERYONE. Especially anyone wondering about the "magic formula" of working short sales:
    http://www.thinkbigworksmall.com/mypage/player/tbws/23088/1153419

    -Brian



    I have read a lot of loss sharing agreements that the FDIC puts out. I did not put the UPB part of the loss sharing agreement togther. I did some research to vaildate or dispute what was put in that vid. As far as I can tell they are right.

    The key is too define what assets are covered by the loss sharing agreement, if the assets purchased at a discount are not covered then.....

    here is the verbiage from the loss sharing agreement
    http://www.fdic.gov/about/freedom/IndyMacSharedLossAgrmt.pdf

    First Loss Amount" means the dollar amount equal to the product of (i) 0.20 multiplied

    by (ii) the aggregate unpaid principal balance of the Shared-Loss Loans as shown on the Loan

    Schedule attached to the LSA as Attachment A, as updated as of the Closing Date in accordance

    with Section 2.06 of the LSA, which dollar amount represents the total amount of Losses on

    Shared-Loss Loans the Purchaser has agreed to realize before the Receiver is required to make

    payments to the Purchaser with respect to Shared-Loss Loans pursuant to Section 2.l( d) of this Agreement.

    http://www.fdic.gov/news/news/press/2009/pr09042.html

    As of January 31, 2009, IndyMac Federal had total assets of $23.5 billion and total deposits of $6.4 billion. OneWest has agreed to purchase all deposits and approximately $20.7 billion in assets at a discount of $4.7 billion. The FDIC will retain the remaining assets for later disposition.


    FDIC and OneWest have entered into a loss share transaction on the single family residential portfolio. Under terms of the loss share agreement, OneWest will continue the FDIC's existing loan modification program.


    If you pay 75% UPB and are protected to 80% of losses on THAT, you have a very nice future with little risk of 'loss' on the balances.






    1Reply
  • Jeff TumbarelloPro Member
    Real Estate Broker · Fort Myers, FL · Member since 2008 · 1k+ posts · 323 votes
    16y

    Looks like the FDIC has responded to the video. I am shocked that they did.

    http://www.fdic.gov/news/news/press/2010/onewest_lossshareb.html

    Let's see now - first 2.5B is Onewest's loss, recoverable over a decade
    or so after the heat blows over.

    I particularly liked this statement - vague enough to lose even me if I
    don't pay close attention the THIRD time I read it:

    "Only 7% of loans OneWest services are owned by OneWest and covered
    under loss share. Other institutions own the remaining 93% of loans
    OneWest services. These loans are required to be serviced in accordance
    with the owner institutions' agreements with OneWest."

    One might wonder who those "Other institutions" might be, just for a
    start. If Onewest took ALL of Indymac's mortgages and that only
    represents 7% of its servicing biz, that must be one BUSY place during
    the first 10 days of the month.

    Oh, and the deal was "Competitively bid".. Did you get a bid request?
    Mine was obviously lost in the mail and I must have forgotten to put the
    secret meeting prior to public closing on my Blackberry.

    Interesting coincidence found within..

    //www.fdic.gov/news/news/speeches/archives/2009/spdec0809.html

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    Classic...couldn't resist bumping!

    0Reply
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