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Pretty disturbing information in last week’s “homework” video, right?   Even though I have no way to verify the information, it seems to offer a plausible explanation for the low percentage of completed loan modifications.  If you missed it, go to my blog at www.hawaiianrealty.com, my Twitter or the Team Nakanishi Facebook page.  

The video infers that the investors, in this case, One West Bank, have little motivation to modify loans.   It exemplifies how short sales and foreclosures can be an important profit center.   Just yesterday, I closed a year-old short sale and while my business does not rely heavily on foreclosure listings, it’s unavoidable business.  

While untangling the problems underlying short sales and/or foreclosures is far above my pay grade, even Beetle Bailey could figure out that the system has serious problems.  It’s so bad that the standard joke about short sales is that the first question to ask after submitting the 50 to 100 sheet short sale packet is whether or not the loss mitigators have lost the packet yet!  Truth is, if they don’t receive one of the required pages, they simply file-13 the entire packet!  Even worse, if you don’t close on time, your entire application is subject to cancellation…even if it’s the lender’s fault, which it normally is.  

When it comes to foreclosures, there are as many war stories as there are properties.  Here’s the curiosity. Most are processed by asset management companies.  These companies aren’t necessarily associated with the lender.  In fact, they often have no idea who owns the loan.  Lenders use asset management companies not only to help manage the workload but more significantly, as a place to “house” non-performing inventory.  Such asset shifting takes the inventory off their books.  

Working with these third party vendors can be a great source of frustration.   The asset managers are rarely in Hawaii and they know little about listing and selling in Hawaii.  Their workflow is processed on-line in a very mechanical manner.  Trying to interact directly with an asset manager is next to impossible.   Sometimes, they don’t yet have title to the property and still they insist we hurry to list it….which of course, we can’t.  Unfortunately, we are “scored” on how quickly our tasks are handled.  Slow performance affects future assignments.  Not the best business relationship. 

Here’s specifics regarding how our East Hawaii market has been impacted by residential REO (foreclosures) and short sale properties (note that several contingent REO properties have been in escrow for an extended period; the lender isn’t able to close) :



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