Expert: Dick Dennis - 9/16/2009

Question
What is the process the seller's lender goes through and why does it take so much time?
Thanks

Answer
You have asked a question, Michael, to which most real estate agents would like to know the answer.

First of all, the lender procrastinates because they know they are going to lose money on that particular house/mortgage/sale. Let's put it this way: If a relative, a friend or a buddy at work were to borrow, say, to keep it simple, a $100. I figure you wouldn't lend that much to someone you didn't know.

But, one day your friend tells you that he lost his job and he may not be able to pay that loan back to you. But he does make an offer. He says, "I will pay you $50 and that will settle my debt to you, okay?"

Well, you aren't thrilled, but think about it. And you think about it. And you think some more before you decide to accept his proposal. He would have paid that $50 you right away. Reluctantly you accepted it.

That's what goes on with the lenders and their short-pay sales. Only they are hoping that the listing agent will get another higher offer to buy that house, which means they would have to lose less on that short pay. So, they find all kinds of excuses. They'll ask for filled-out forms that have already been submitted . . . sometimes two or three times already.

Now throw into that stew the fact that the banks and lenders (it's not really the banks and lenders, it's servicers who take care of mortgages). A long time ago, the lenders sold the mortgage to another bank or investor, some of them in Europe or the Orient and the original lender retained the servicing rights for a fee. So, it's the servicers who make the decision AFTER they have asked the investors if they are willing to lose money on their mortgage they bought. Some of those mortgages have been sold to Fannie Mae or Freddie Mac and THEY have to make the decision.

While they are waiting for an answer from the bank or investor or Fannie Mae or Freddie Mac yes or no, they ask for more filled-out documents. And it drags on. Now multiply that whole mess by millions and you have one heckuva mess, right? There are variations of what I have presented here, but I am sure you get the idea. I do wish you well.

Dick Dennis
dixiedee13@aol.com