Availability of distressed property notes could grow as disenchanted homeowners are snubbing offers of up to $150,000 from mortgage lenders.
Bank of America is reporting a complete lack of response to offers of $150,000 principal reductions by the majority of 60,000 borrowers who were sent letters in May. This is on top of poor responses to the “cash for keys” initiative and the offer of $30,000 cash for relocation assistance to homeowners opting for short sales.
This may seem surprising to many who can’t believe borrowers would rather go through foreclosure and be evicted without a penny instead of getting money to walk with or having their principal balances reduced and payment arrangements modified. A big part of the problem is that homeowners are just pain burnt out from endless unfulfilled promises of help, and they no longer trust banks after years of abuse and fraud. Who can blame them?
On top of this, some experts say that while there are issues which can be blamed on operational efficiencies, banks are simply not living up to the terms of the $25 billion settlement. They will “lose” paperwork, send borrowers into endless phone loops, and even miscalculate income so that modification requests are shot down. Unfortunately, it is unlikely that there is much that can or will be done to make sure lenders tow the line. Why should they? They have already proven that in the worst case scenario they might receive a slap on the wrist.
The end result is that borrowers simply don’t even want the banks’ “gifts,” opening up more distressed property notes for sale via the back-end, with smaller banks perhaps the most willing and operationally able to make deals with note buyers.
The great news for buyers of non-performing distressed property notes is that they have a much better chance of working things out with property owners to quickly get loans back on track. This means being able to turn non-performing loans back into performing ones which can be held for the long term with appreciative and loyal borrowers, or simply seasoned and sold for bigger profits to other note buyers.