America’s Foreclosure Crisis – Part III of the Starbling Story

On July 16th, I wrote Part II of the series on Jeff and Tiffany Starbling, the Florida couple who was working through the morass of the loan modification process at Bank of America/Countrywide. At that time, they had been in the “process” for over two months and despite the help of a very experienced attorney, Jennifer Shiffer, at the law firm of Pels Anderson PLLC in Bethesda, Maryland, they had yet to receive any formal notification from BOA/Countrywide that their loan had even been assigned to a loan modification specialist. The Starbling’s account had gone delinquent as of July 1st and was in the never ending repetitive quagmire of repeated calls from Shiffer, only to hear “we have nothing to report at this time, your case is being assigned and we will let you know”. Throughout July, August, and into September, the Starblings waited and waited to no avail.

Emails, like the one below, to BOA/Countrywide from Shiffer pleading for help were never responded to:

Lidia and Michelle,
The documents for consideration for a loan modification for the Starblings now have been with Bank of America for more than five months. The only update I ever receive is that “it is under review.” I am never able to get in touch with Lidia or anyone else assigned to this file. There has to be something more than “it is under review” at this point. Has an appraisal been ordered? Are you waiting for investor approval? Who is the investor? My clients are quite frustrated with this whole process and seriously are considering filing bankruptcy in which case Bank of America would receive $0. Please contact me as soon as possible as I find it inexcusable that no one with actual knowledge of the file is ever available to speak with me.

The lack of progress was too much for the Starblings, who decided to take matters into their own hands. On October 1st, they listed the property for a short sale for $129,000. Remember this is 35% below the original purchase price of $200,000 (which is also the loan amount). On October 29th, they Starblings received their first offer for $119,000. Their realtor submitted the offer to the bank the next day.

Less than a week later, on November 4th, attorney Shiffer received the following email from Lidia V. Canedo of the BOA/Countrywide loan modification department:

This loan was assigned to me on 09/21/2009. I am attempting to get through my files as quick as possible. I will give you a status this week but please understand that this loan does require investor approval and that they do take time. Thank you.

The same day (after Shiffer forwarded the email to the Starblings) Jeff wrote back to Shiffer:

I received the response from B of A. We do have an offer on the house, but the realtor said it takes months to complete and that it usually takes about 3 offers to complete a short sale. If B of A gives us a decent loan modification, we would consider staying. We don’t think it’s fair that a new owner can come in and pay far less than we did and get a much better loan. Why don’t they just work with us! Time will tell. Jeff

The next 13 days were filled with requests from BOA’s Canedo to Shiffer for updated W2 info, bank account statements, credit card balance explanation, etc.  Then 13 days later, on November 17th, the bottom fell out. Shiffer received this email from BOA’s Canedo:
I just saw that this loan is being looked at for a short sale. The borrower’s agent has sent in a purchase agreement. At this time, the mod review will be closed out, they cannot try to pursue a mod and a short sale at the same time. File is declined.
Lidia V. Canedo

Almost 7 months of work gone. A last minute tirade of emails ensued between Shiffer and Starbling questioning whether or not if the Starblings should cancel the short sale in an attempt to get the bank re-open the loan modification. This was a risky proposition, as there was not guarantee that they would or if they did what they would be willing to offer. After much deliberation, Starbling wrote:
It took Bank of America entirely too long to look into our case. We have been requesting a modification LONG BEFORE the short sale process began. We do not want to prolong this situation any longer than it needs to be. At this point, our credit has already been damaged and we no longer want to stay in this house. They had plenty of time to work on this and our situation was not addressed until it was too late.  If they gave us an answer sooner, then maybe we could have worked something out with Bank of America and stayed in the house. We do not want to risk losing the short sale offer.

With that, the Starbling loan modification process officially ended.

A new chapter has begun, the short sale process. As most attorneys and realtors who handle short sales can tell you, this process can take from 4 to 9 months. And, along the way, you may end up getting foreclosed upon and evicted. If there is ever evidence of the right hand not knowing what the left is doing, this process should serve as the highlight film.

For all of us who pay taxes and own homes, this process effects us all. First, we are in one form or another, subsidizing the banks ineptitude with our tax dollars. This adds to the debt which is so out-of-control, I don’t even have enough time to scare you with the facts. Suffice it to say, we (America) is past broke and the result of all this debt will be catastrophic. Second, the fact that the bank can’t seem to work out a “deal’ with a homebuyer who wants to pay his mortgage, but needs a lower rate, makes you wonder how bad is the problem?

To be fair to the banks, I’m sure they are not happy with any of this at all. Jamie Diamon, CEO of JP Morgan Chase, didn’t wake up this morning and gleefully thank his lucky stars that his banks has tens of thousands of Starblings to deal with and that his (and all) banks are simply not set-up to handle this kind of situation. The problem is that the banks don’t consider loan modification a “money making” part of their business and therefore, they are not putting their “best and brightest” on the job. Instead, they are outsourcing call centers to India and having their front line people babble endlessly about nothing. I have been on the calls. I can tell you that the “customer service” representatives (whom I listened to) DO NOT know how to field calls regarding residential loans. Many of them should be selling tickets at the movie theatre.

This is why you should be angry. Congress, the Treasury Department and White House have all banged their fists over the past several months in order the get banks to move resources into this problem area. They warn, they scold, and they threaten and even try to entice the banks to do more, quicker. But the process drags and with it, thousands of Starblings face the loss of their homes and the banks face loan write downs that will total hundreds of billions.

I am no fan of government intervention. In general, I think government screws things up. Private enterprise is the backbone of this country and it’s the only thing that will keep America going. But at times the government should “guide” business in areas that affect the nation. With over 75 million home owners and 140 million taxpayers being affected, the residential home crisis is one of these areas that need urgent attention.

I will continue to update the progress on the Starbling’s short sale in the coming months. As it stands now, BOA will be looking at an $80,000 loss, plus accrued interest. Too bad they didn’t have some bright dealmakers on case in July, they would faired much, much better.

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