Jean Chatzky Falls Short on Short Sales
Published Aug 12th, 2009
 (No Ratings Yet) Loading ... | Share: |
|
–
For over a decade, I have felt that much of what Jean Chatzky advises is off the mark for real people who cannot model their lives off of a Finance 101 text book.
Today, on NBC’s The Today Show, Jean Chatzky advised Stephanie from California not to engage in a short sale of a couple properties the caller acquired during better economic times. Instead, Chatzky wants this woman to cut her budget elsewhere, keep making the payments on these properties and to look into taking a loss by just selling the properties for what she can. According to Chatzky, a bank won’t negotiate a short sale if the borrower has been making their payments.
Visit msnbc.com for Breaking News, World News, and News about the Economy
Herein lies one of the biggest problems with the whole aftermath of the banking crisis: BANKS REFUSE TO WORK WITH THEIR BORROWERS.
Business is business, right? Well, sometimes in business you acquire merchandise that won’t move on the floor, or your restaurant fails to make a profit on a new, special entree or the cost of your supplies suddenly increases. What do you do? You ADJUST.
Banks, through unprecedented con artistry, just received the largest handout of taxpayer money given to private companies in U.S. history. Part of their con scheme was to lend to individuals based on the potential appreciation of their properties during a suspiciously vigorous housing market. Banks failed to conduct due diligence on these mortgages and instead relied solely on for-profit credit reporting agencies (another industry of con artists) and the borrower’s own “declared income/declared assets” testimony. So is it really ALL of Stephanie’s fault that she is in the predicament she’s in now that the market has collapsed? NO! The bank which extended the mortgages to Stephanie did so using the same judgment Stephanie used–That her properties would appreciate in value, grow in rental revenue and ultimately pay for themselves at some point in the future.
So, after receiving billions of dollars in bailout money and being instructed by the Federal government to “work with borrowers” and spending millions of dollars on disingenuous advertising that SAYS they are indeed “working with their borrowers,” why does Stephanie’s bank and thousands of banks like hers, refuse to work with her on a short sale agreement? Wouldn’t a short sale benefit both parties who stand to lose everything if Stephanie elects foreclosure as a way out?
Isn’t business just business? Isn’t it sometimes the case as a business owner that you are forced to adjust to plans that didn’t work out and go to Plan B during changing economic conditions? Isn’t efficiency and the ability to adapt to adversity in the marketplace a point of boastfulness amongst those who cry out for freer markets?
Why then does Stephanie’s bank refuse to work with her when it can only acknowledge that Stephanie’s situation was the result of something way larger than Stephanie? Shouldn’t Stephanie’s bank take responsibility for lending to Stephanie and not foreseeing a situation when Stephanie’s properties might depreciate or fail to generate adequate revenue to make her mortgage payments? Wasn’t the bank ALSO overreaching in their expectations surrounding Stephanie’s mortgages?
Where is the business logic in this situation? A short sale would pay MOST of the mortgage back to the bank and would put the entire burden of arranging the sale onto Stephanie. This would save the bank foreclosure costs, listing costs, realtor fees and possibly the outcome of an even lower sale price than what a short sale might bring. What idiotic businessperson would turn down an arrangement like that given the current economic crisis CAUSED by the BANKS?
Yet despite Stephanie’s pragmatism and initiative to arrange a short sale, Stephanie is instead supposed to cut her budget (something I’m sure Stephanie would have never thought of doing, on her own, without Jean Chatzky’s ingenious advice) and basically strain, stress and struggle for years on end because her bank is being petulant and rigid about resolving a situation they are partly to blame for.
Because Jean Chatzky failed to do so, I am going to give Stephanie the realistic advice she really should have gotten when she asked The Today Show her question:
Stephanie, market conditions have changed dramatically since you first took out those mortgages. Your bank is living in a state of delusion and greed, brought on by a pathological failure to acknowledge their own complicity in your situation. Therefore, you need to stop making your payments immediately and for several months. I have seen it over and over again that these obdurate lenders will suddenly capitulate the minute they do not receive a payment. Of course they’re relying on the fact that you’ll be too intimidated by the credit rating system to take such a bold action as missing a payment, but this is the only way to make banks sit down and beg. So WHAT if you have late payments on your credit report? You’re facing much graver consequences to your lifestyle than bad credit, right now. You do not need more credit anyway. Also, you will have a much easier time getting a mortgage in the future if you do not have such a heavy credit burden as the one you are currently shouldering. You and all other Americans need to stop caring about your credit scores and start doing what you need to do to right your lives.
My friend just recently tried to work with his mortgage lender to get them to acquiesce to a short sale and they flat out refused him. Finally, in a state of total fatigue, my friend stopped paying and rented out his home on a month-to-month basis. After the very FIRST missed payment, the lender called him (sometimes six times a day) to work out a short sale. He now refuses to talk to them. The short sale he had lined up came and went by the time the bank was willing to do business. He knows, however, that it will take a year for the lender to complete a foreclosure action. Meanwhile, he is renting a beautiful apartment, for himself to live in, at half the monthly cost of his former condo mortgage payment. His renter is thrilled with the place and is fully aware that he only has a month’s notice, at any give time, to move out should the foreclosure kick in.
My friend was able to use the money he saved to pay off all of his credit cards. Is he concerned about his credit rating? A little. But that fear pales in comparison to the state of relief he is now living in. His life is back under his control. He is happy and free of the stress he has now shifted back onto his former lender.
Now, that being said, if your credit score is such a huge concern for you, then understand that it is totally within your rights to coerce the bank, in a short sale agreement, to remove any negative credit reporting concerning this transaction as a condition of the sale. Yes, it is entirely within their power to do that.
Stephanie, you’ve been a a prudent businesswoman, you’ve tried to work with your bank. They are being impractical and seem incapable of adapting to changing market conditions due to their complete inefficiency as a business, so you have to take the lead and stop making your payments on these buildings. The bank WILL approach you after a missed payment or two to arrange a short sale. Make them squirm for a few months after that. You will get your short sale and your life and credit will not be harmed as severely as the toll taken if you followed Jean Chatzky’s advice by continuing to endure years of stress and hardship. Don’t waste any more of your life shouldering a burden that is not entirely yours to shoulder.
Banks were instructed by Obama and by the Federal regulators to work with borrowers like yourself. If they refuse to help clean up the mess they made, then people like you need to make them.
Loading ...