Here is a story about Mr. Mcardle who lives in Mesa, Arizona. Mr Mcardle being in the construction business suffered loss of income due the declining real estate market conditions. Mr Mcardle got behind in his mortgage payments and his bank or servicing company Litton Loan Servicing LP started the pre-foreclosure process.

Mrcardle employed Encompass Realty ® to sell his house at fair market value but fair market value is less than originally owed, so Manny, Broker of Encompass Realty ® started the short sale November 2007. After over 50 phone calls Litton Loan Servicing gave a short sale approval on about February 2008. But one week before Litton Loan Servicing fax over the approval, the buyer would not wait 4 months and cancel and bought another property.

Encompass Realty ® received another offer February 2008, and Litton Loan Servicing stated it should take two days for an approval. Mean while the real estate market is still declining in most areas. Litton Loan Servicing promised May 27th 2008, in about 48 hours we should get the approval. This is now 3 months later. May 30th, 2007 .Encompass Realty® received the fax approval and guess what, buyer cancels and buys another property couldn’t wait 3 months. Who is to blame them.
So the question why would any buyer make an offer on a short sale? why wait so long? agent for Century 21, who does not want to be name, stating that the agents are being told not to make offers on SHORT SALES properties for sale.

We talked to Encompass Realty ® located downtown Chandler, about how real estate short sales are done in today’s market. Manny, from Encompass Realty ® said the process is somewhat simple but frustrating due the response times from the banks.
Manny says the short sales process starts with the homeowner. The homeowner will need supporting documentation to be presented to a bank upon a receipt of a purchase offer from a buyer. You must have a complete short sale package to be successful but more importunately you need patience. A short sale from beginning to end will take up to 30 days to 6 months. So why would anyone wait for approval for a short sale when there is so many REO’s on the market?
We recently visited ReconTrust website and got some information regarding foreclosure sale data from May 1st to May 9th which is about 7 days of data. According to ReconTrust there were 135 properties that went to auction and 95% or 128 properties when back to the bank and will in sometime be REO property for sale.
ReconTrust is just one company or trustee in Arizona that process the auctions for the beneficiaries (banks). So if there are about 5 top volume trustees foreclosing about 640 homes going back to the bank every 7 days or about 2,560 homes a month, that’s a lot a home yet to make it to the market. Banks are losing more money when they don’t short sale but ‘investor’ policies are keeping the majority of short sales from even taken place.
On the ARMLS there are about 6,880 single family homes that are REO for sale out of 44,588 residential homes market today. This represents 15% of the homes for sale are owned by the bank but if you combined the properties that went back to the bank in the last 7 days it would be estimated the bank has over 25% of the real estate market for single family homes for sale.
The only reason to do a short sale is if and when you can close from an approved short sale the seller will not have a foreclosure on their credit.

The Arizona Real Estate Foreclosure market is seeing an increase in foreclosure notices according to Manny Caballero of Encompass Realty ®. Today in single family detached homes that are about 6,710 properties that are REO, or bank owned and about 44,613 single family detached homes on the market making REO representing about 15% of the Arizona real estate resale market and that percentage is growing.

In speaking today with Anthony with AZCO Properties says that a good percentage vacant REO vacant properties are getting broken into and what is getting stolen are taking cooper plumbing, AC units and more.
Manny Caballero of Encompass Realty ® stated he just got off the phone with Ocwen they stated Ocwen is not doing short sales? What is Ocwen Financial Corporation up to? Manny is also stating Indy Mac is charging to process a real estate Short Sale.

take example of a short sale with Encompass Realty ® who is currently negotiating with a bank:
Property Purchased in March 2005 with a $ 143,000 purchase price. The first mortgage is foreclosing with a sale date May 21st, 2008. There was a second mortgage taken out by the owners to remodel their house. The second mortgage is with Washington Mutual, aka WaMu.

In a real estate foreclosure situation when the first mortgage reaches the foreclosure auction date and nobody bids to purchase the property, it goes back to the bank as a REO, which is a good chance in today’s real estate market. What happens to the second mortgage? The second mortgage loses their investment.
So with the foreclosure sale date approaching, Encompass Realty ® has been trying since early April 2008 to obtain a short sale approval on the second. The second mortgage investor would get back 25% of the loan amount which is unheard of in a real estate short sale. Normally a second would only be allowed to bet only $ 1,000 to $3,000. Washington Mutual doesn’t return phone calls. Stay Tuned.
Realtors may want to rethink making offers on real estate short sales. Unless you can wait months, Manny states he rather make offers on REO and real estate resale’s.

Real estate short sales in the Arizona seems to be increasing and through out the nation. Encompass Realty ® in Arizona states that they are processing over 60 real estate short sales at any given month and is rejecting about 75 customers per month.

What is a real estate short sale? A: Simply, the real estate home owner owes more than fair market value.

Why would a bank accept a real estate short sale?
A: Most real estate markets it would cost the bank more money to complete a foreclosure, pay attorney costs, pay to maintain the property for sale, pay to make repairs, pay pay pay. It costs a bank about 20% to 45% of the existing mortgage to sell the property as a REO due to declining.

What makes short sales so hard?

1. A BPO (Broker Property Opinion) agent that wants to remain anonymous, states in order to get many BPOs from Clear Capital (http://www.clearcapital.com/) the real estate agent was told to increase their opinion of value because Clear Capital had to “maintain good relationship with the banks so they can make money” The banks uses a BPO to determine if a offer for a short sale is a good offer, but are they getting incorrect information? According to the anonymous agent, Clear Capital pays these agents about $50.00 to $ 85.00 to do the job a licenced Apprasier or a Real Estate Broker. I wonder what the percentage of real estate property goes back to the bank? In most states, Clear Capital is in violation of Real Estate Law, where most states require its the Real Estate Broker that can pay a real estate agent not Clear Capital.

2. Banks or Servicing agent for the bank are not staff to handle real estate short sales. Encompass Realty ® states in April 2008 some banks are taking up to 4 months to approve a short sale, most real estate buyers can’t wait that long and canel the transaction leaving the real estate company 30 days to find another buyer.

3. Banks or Servicing agents for the banks finally get ready to approve a real estate short sale, like Countrywide, in April 2008, told the listing broker to reduce his and the selling agent commision in order to get an approval. Companies like Countrywide and others are “Interference with an existing contractual relation occurs when an outside party interferes with an existing contractual agreement between two other parties. ” Because Country wide and companies like them are infact open to a lawsuit because they are interferring with a existing contract between the listing brokerage and the seller and the listing brokerage and the selling brokerage. Its a time bomb that could have a class action law suit just waiting to happen.

4. BPO’s, banks not paying for a apprasial from a licenced apprasier, or getting a Broker Property Opinion from a Broker who has many years of experience rather an typical agent with less than 1 year experience is most likely getting the wrong information such as the BPO’s from Clear Capital.

Encompass Realty ® states the #1 reason people are in a real estate foreclosure is ” job loss”.

#2 reason people are losing their homes to foreclosures? Bank are not willing to lower their interest rate or convert the arm mortgage to a fixed rate. Thats right, Federal Goverment has a program call “FHA Secure Program”, Encompass Mortgage LLC reports they had referred 50 people that qualify for the “FHA Secure Program” but the bank with the licence to do FHA insured loans added more conditions outside the lending guidlines of HUD and rejected the 50 people for any refiancing. If we know of 50 people who could not get a loan per the FHA guildines from a Bank that has a FHA licence should the bank have a FHA licence.

#3 reason people are in foreclosures is really they were put in bad loans and they really can’t affored the property or the bad loan. In most cases banks could lower their payment or those qualified for the FHA Secure Program refiance them to a lower payment would reduce the “wave of real estate foreclosures”

Companies like “Walkaway Program LLC” are starting left and right. We recommend Walkaway Program but there is so many companies that don’t help anyone. Buyer Beware..

In California and Arizona people are putting their house keys in the mail, mailing their keys back to the lender, ” Jingle Mail”
People facing foreclosure are feed up waiting for the bank to approve payment arrangements to get out of foreclosures and lack of communication or their property values are declining so bad, that “Jingle Mail” is increasing.

Banks and their servicing agents better pay attendtion, as of today in the Arizona MLS, there are 45,559 residential houses for sale and of that 6,533 for sale are owned by the bank, thats 14% of the homes for sale today are owned by the bank. Encompass Realty ® believes that number is really 30% because the time it takes to get a foreclosed property ready to sale is taking time due to the sheer number of foreclosures.

What is the future for Banks? Class Action Suits from Real Estate Brokerages and sellers? More Foreclosures because banks can handle the sheer number of calls for help on payment and short sales?

Its about April 19th, 2008 we check with Encompass Realty ®, arizona real estate company, Encompass Realty states in the Arizona Multiple Listing Serivce there is about 52,621 residential houses for sale, and out of that 6,421 are Bank Owned property that have been forelcosed on. On this apple for apple results the banks have
12% of the house for sale.
Encompass Realty is reporting the number one reason people are in forclosure, “job loss”. The second reason people are in foreclosure is probably bad loans but more inportant, banks are just not willing to provide foreclosure help.

Workout efforts have been too little and too late to stem the surge of foreclosures that continues to roil housing and financial markets.

The number of homes entering some stage of foreclosure jumped almost 100% in the third quarter from the same time a year ago and 30% from last quarter, according to RealtyTrac, of Irvine, Calif., with a sizable jump in the number of homes completing the foreclosure process and being taken back by the bank (referred to as real-estate owned, or REO).

“We saw a fairly big spike in REO activity” in September, says Rick Sharga, vice president of marketing for RealtyTrac. “We’re not done with this mess yet.”
Indeed, despite all the hype about hot lines and special loan-modification programs, analysts say little has been done to help a significant number of borrowers stave off foreclosure.

“There’s a lot of movement in the right direction,” says Amy Schur, national campaign director for the Association of Community Organizations for Reform Now (ACORN), which has campaigned against predatory lending. “But that doesn’t mean we’re seeing it yet on the front lines with borrowers.”

Significant risk to economy

A recent survey from Moody’s Investors Service of the top 16 subprime loan servicers – which handle $950 billion in loans, or 80% of the market – found that they had modified only 1% of their loans that had reset to higher interest rates during January, April and July 2007.

Getting some traction on these troubled loans will be critical, analysts say, because the foreclosure crisis is likely to get a lot messier. A huge wave of subprime loans made in 2005 and 2006 – many under looser lending criteria with a greater risk of default – will reset between now and next summer. Rates on 2 million mortgages will rise by the end of 2008, and one-fourth of those affected homes will face foreclosure, estimates the U.S. Department of Housing and Urban Development.

This surge in foreclosures and the resulting drain on the economy is “the most significant current risk” to the economy, according to Treasury Secretary Henry Paulson, who in a recent speech warned of the “immediate need” for lenders to modify and refinance more loans.

Lenders changing their tune

Until recently, however, some investment groups and lenders had refused to do any loan modifications, Schur says. But, with such a large number of loans going into default, many are now changing their tune.

Countrywide Financial, one of the nation’s largest lenders, recently announced that it will refinance or modify up to $16 billion of adjustable-rate mortgages through the end of 2008, to help as many as 82,000 borrowers stay in their homes. Countrywide also says the same loan-modification approvals and paperwork that used to take more than a month can now be accomplished for delinquent borrowers in five to 10 days. “Any kind of foreclosure action will get delayed or stopped while we are working on the paperwork,” says Countrywide Senior Managing Director Steve Bailey.

Why more lenders weren’t willing to offer these fast-track solutions earlier is puzzling to many, even those inside the industry.

Lenders and investors have real incentive to work with borrowers, because the foreclosure process causes them to lose an average of 50% of their investment, says Ron Morgan, a managing director at ISGN Technology’s third-party servicing company, MortgageHub. “The best thing investors can do is to try and keep them in their homes until the housing turnaround.”

Quick action is critical

Countrywide and other lenders have come under fire for making loans that borrowers could not afford and, in today’s market, cannot refinance. Of the $468.2 billion in loans that Countrywide made in 2006, $40.6 billion were nonprime.

Lenders say they are taking steps to contact troubled borrowers and work with them. But often, by the time they get approval for a loan modification, it’s too late and borrowers have already lost their home.

At least two of the top five loan servicers have been telling borrowers that it will take two to three months to find out if their loan even qualifies for a workout, says Morgan.

Quantum Servicing, Countrywide and others say they are starting to call borrowers months in advance of loan resets, warning them that their payments will go up and advising them of their options. At that point, the borrowers are in good standing and their loans are easier to refinance.

“We are trying to coach homeowners,” says Countrywide’s Bailey, “so they can get quicker answers and solutions.”

But some of the top U.S. loan servicers “do not have the staff or the technology to meet the demands of borrowers meeting resets on adjustable-rate mortgages,” Morgan says.

Thousands of new jobs have opened up at financial companies to deal with this influx of delinquent borrowers, but with so many positions open, Morgan says, employers have struggled with a revolving door.

Some borrowers avoid lenders’ calls

Lenders also complain about the trouble they have had getting borrowers on the phone.

Sue Byrd, loss-mitigation team leader at Quantum Servicing, says they put out about eight to 10 calls on average to each delinquent borrower, and as many as 50 calls if they are having trouble reaching a borrower.

To get more of their calls returned, the company recently began offering Starbucks Coffee gift cards and prepaid cell phones with 30 days of service, as lures to speak with one of its representatives.

Many of those who answer the phone will hang up, or say the borrower is busy or not at home, Byrd says. Borrowers, she says, are afraid of speaking to debt collectors for fear they will lose their home. “A lot of times, they are substantially behind and they think they have to come up with all of it to rectify the situation,” she says. “They hear the word foreclosure and they just shut the door.”

But, in most cases, she says, borrowers can work out something to prevent foreclosure. Most who show that they can make at least three months of payments at the lower tier (before rates bumped up) can qualify for a modification or refinance. That excludes the unemployed, however, such as the large number of autoworkers who have lost their jobs in Michigan, Ohio and Indiana. Many of these borrowers aren’t eligible for refinancing or other modifications.

States step in to help

But to date, analysts say, even the lenders who have gotten borrowers on the line haven’t offered much relief, despite all the hot lines and hype. Indeed, some are just pushing back the reset on loans or forgiving one or two payments, says Brian Hudson, executive director of the Pennsylvania Housing Finance Agency. “I don’t think that’s sufficient,” he says. “For us, (a loan modification) means truly restructuring the loan so (borrowers) are in the best place for the long term, rather than the short term.”

Many state housing groups have stepped in to bail out troubled homeowners, before the problem does significant damage to their communities.

Hudson’s agency, which launched its program last week, is negotiating with lenders to reduce the payoff on some loans that are over market value. It also plans to sell state bonds to help underwrite the cost of making new 30-year fixed-rate loans to 500 to 1,000 distressed homeowners in the next 18 months.

At least a dozen other states have launched assistance programs. Some simply offer counseling hot lines, but a handful in Ohio, Delaware, Maryland, New York and Massachusetts help borrowers to refinance, and one in Michigan helps borrowers with mortgage payments when they become involuntarily unemployed. However, many of these programs – including Pennsylvania’s – are only just now taking applications or refinancing their first loans.

Meanwhile, lenders are forming partnerships with third-party debt counselors and other groups to try to get distressed homeowners talking about their options. “Many times a borrower would rather talk to a counselor first than go directly to their lender,” says John Mechem, a spokesman for the Mortgage Bankers Association.

That’s understandable, Schur says, given the horrible predicament many borrowers have been put in by these financial institutions. “Many were ripped off from the get-go by brokers and lenders who got them into a really bad loan. It’s hard for them to know who to trust.Melinda Fulmer

Encompass Realty®, www.encompassrealty.com, arizona real estate