Bank Stupidity And Why We Should Have Let Them Fail!

Okay, so your tax dollars have gone to help out financial institutions who made bad loans an art.  So how are they using federal funds to loosen the credit market and make housing easier to obtain?pullhair

Wachovia’s Stupid Stip
I had a buyer that wanted to buy a house, bank owned house that is, from Wachovia.  Priced at $219,900 the actual value is probably around $245,000.  My buyers anxious to make an offer came to a sudden stop when I read to them a stip in the corporate addenda that I’d never seen before.  Seems Wachovia has decided that the buyers must put down a 5% earnest money deposit that is totally and completely nonrefundable.  Inspection out?  No.  Financing fall through because you lose your job before closing?  Too bad.  They want the buyers to take an approximately $11,000 gamble to buy the house.  It’s a pretty good bet they could/would close.  But seriously…  That was five weeks ago.  Guess what.  The house is still on the market.

HomEq Loan Servicing Corp’s Stupid Stip
Yesterday I inquired about a short sale home that is in the redemption period in Kansas.  Needs about $45,000 worth of repairs but perfect for these young, energetic first time home buyers.  After they buy the house and make the repairs they’ll be up some serious equity.  But wait.  Before HomEq will even look at an offer they require a certified appraisal paid for by the buyers!  Oh, and there are no guarantees they will negotiate with you, meet your offer or even accept the certified appraisal! 

Countrywide Home Loans’ Stupid Actions
I have had a short sale seller for the past few months.  Countrywide sent me a letter stating what they would take.  I’ve sent them three (that’s 3!) offers within a very reasonable pricing window and all three offers have been completely ignored.  No response.  Repeated phone calls, emails and letters unanswered.  Calls to supervisor?  Hah!  I finally pulled my sign and told the very upset seller I’ve had it and sorry they had to deal with Countrywide because I was done wasting my time. 

vulturepic_468x440Can somebody please tell me why we should save these banks?  Is this how capitalism rewards the slothful and inept?  I thought capitalism was supposed to let these people fail and someone that can operate a business would pick up the pieces for pennies on the dollar and be rewarded.  Jeff Brown, you are being called out here.  You like to tell me there is a greater good.  Where is it?  😉

7 Comments

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7 responses to “Bank Stupidity And Why We Should Have Let Them Fail!

  1. Sorry for the delay, as we’ve been going through the, “moving offices nightmare”.

    There’s a huge difference between throwing good money after bad, calling it a ‘bailout’, and actually spending taxpayer money to deal with the real problem. I’m with you here, 100%.

    The ‘greater good’ I spoke of, (a phrase which will never pass my lips on purpose ever again 🙂 ) was the expected result of spending money where it would help.

    What they’ve done so far is a crime. How lenders are behaving and have behaved? Ditto.

    Bottom line, if the government wants to make a positive, and long lasting impact on the real estate economy, they can do one simple thing — spend $4-500 billion on the bad loans — then walk away and let the chips fall from then on. If they’d done that on Day 1, the problems of liquidity, reserves, and in most cases mark to market accounting, would’ve disappeared overnight. Lenders would be lending by the truckloads, and loser lenders would slink away into the night.

    Does that idea make me sick to my stomach? You bet. Does the fact our congress and all the regulatory heads purposefully, or through incompetence (especially the SEC) allowed this to happen make me and you homicidal, change anything? Nope.

    NOTE: Though I’m to the right of Attila the Hun, I also believe when capitalism is sabotaged by gov’t action, gov’t should be part of the solution. I hate socialism and all it stands for. But when the process turns criminally fraudulent via governments hands on help and/or apathy, they should help clean up the mess they created.

    If all we did was insist Fannie/Freddie went back to 1998 rules/regs/underwriting, and the cowardly SEC Chairman would grow a pair and enforce the rules, we could at least proceed through this nightmare at freeway speed.

    I’m with ya here, Chris. And I promise never to utter the silly, fraudulent words, ‘the greater good’ ever again. 🙂

  2. Wow. That was a shorter response than I anticipated. 😉

    I know where you stand, I think. It’s just so irritating working with these people. Yesterday I got a fax from Countrywide saying that since I hadn’t found them a buyer they were terminating the short sale agreement.

    That’s the first frickin’ response I’ve gotten from them since I submitted those 3 offers!!!!!!!!!! Arggghhhhhhhh…..

  3. When Shakespeare wrote about lawyers, he hadn’t met many lenders. 🙂

  4. My short sale experiences are identical with the one you had with Countrywide. I have virtually given up on they, whether is is representing a buyer or seller. Banks make no sense at all. Here is an example you’ll love. Put an offer on a foreclosure house for an investor (paying cash) in early December for around $30,000. List was $43,000. After the typical back and forth we stuck to $33,000 as our high, they went to $40,0o0 as their low. Two days later the listing was pulled.

    Just a couple of days ago the property just came back on the market. The price? The price is $32,777! The property wasn’t even on the market for that missing month and yet they go over $7000 below their “rock bottom” price. What a joke. And of course my buyer has moved on to bigger and better now so he is no longer interested.

  5. I have a very, remarkably actually, similar story also dealing with Countrywide. How they’ve gone this long with out screwing it up is beyond me.

  6. Nice writeup on bank stupidity… I’m sure the executives sitting behind those desks at the banks felt like they were making some really great discissions that would most certainly reduce risk and exposure at the banks while at the same time increasing profitability… 🙂

    IMO though the king of bank/lender stupidity has got to be Fannie Mae with their change of ruling from 10 loans per investor down to 4 loans. I don’t think anyone at Fannie Mae stopped to think one second about what the far reaching impact of that decision would be. They didn’t fully understand the impact it would have on their own institution and certainly didn’t fully understand the ripple effect it would have through the economy.

    I’m currently in the process of writing my state representatives on this very issue. Every investor, real estate agent, mortgage broker, construction worker, etc. should do the same.

    Cheers and good investing!

  7. You are right. Rather than underwriting loans…you know, assessing risk…they decided that if you own more than 4 properties you are a problem.

    Listen, no question “investors” were a very big part of the problem. But were these really real estate investors or real estate speculators? I have a strong opinion that they were speculators. There is a fundamental, cavernous difference.

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