Foreclosure and REO Properties Expert Advice

We, as a people, have become desensitized by the lack of trust that is demonstrated in many segments of our society. 

The government questions the longevity of social security, a trusted legacy for many generations; many pension funds have disappeared, leaving millions without suitable retirement; and now, many banks are having to take away the consumer’s last privilege, the ownership of their own home.  

Although well intended, these great institutions have left the American public pessimistic at best. 

Maybe in part, it is due to the lack of forthrightness. 

I think we overlook the determination of the American people when we avoid the inevitable.  It is a critical time for Corporate America. 

It is a time when they must look themselves squarely in the face and acknowledge openly that there is a problem.  No matter how tempting it is to disguise the truth about their ledger sheet, this is not the time to make projections that are rosier than reality.  The final truth is more devastating then the glossy report that suggests “everything is a bed of roses”… thorny at best. 

According to CNN, Standard & Poor’s is increasing its loss assumptions for sub-prime mortgages originated in 2006 to 19%, up 5% from an earlier loss assumption; cumulative losses from 2006 on sub-prime bonds have more than doubled since July, 2007.

It is estimated that the world’s largest banks have collectively reported more than $100 billion of losses on sub-prime mortgages since last May.

==> US Bank recently reported a 4th quarter loss of $9.8 billion for 2007. 

==> Considered the world’s largest brokerage, Merrill Lynch, has reported a sub-prime loss of nearly $23 billion. 

==> Citigroup announced a $10 billion 4th quarter loss, it’s largest in 197 years. 

==> Bank of America has agreed to pay $4 billion for Countrywide whose net worth on Sept. 30 was three times that and whose market value a year ago was six times that. 

==> There is speculation that Washington Mutual, after reporting their first quarterly loss since 1997, is considering merging with JPMorgan Chase.

==> In December, WaMu discontinued sub-prime loans all together, closed nearly half of their 336 loan centers, and laid off 2,600 people, representing 22% of their mortgage staff. 

==> Merrill Lynch tapped into $6.6 billion in capital injection from Japanese and Kuwaiti investors followed by Citigroup’s $14.5 billion cash infusion from investors from Kuwait and Singapore. 

More will follow; Citibank, Lehman Brothers and Bear Sterns are among top American firms that may be the next to turn to Japanese banks, as well as other Asian investors and sovereign wealth funds.

Okay, already.  We know we have a problem and a very big one at that. 

So let’s pony up to the table.  It is essential that a leader in the industry needs to set the stage with honest disclosure and implement an aggressive plan to offset these losses with a campaign to keep as many distressed property owners in their homes as possible. 

It is the best plan. 

The cost of foreclosing or accepting buyouts from “short sale sharks” will cost them significantly more in the long run. 

Why pass the earnings onto investors that walk away from the escrow table with cash in their hands, leave property owners in moving trucks, and banks reporting losses? 

Doesn’t it make complete sense to share the loss and the gain between the property owner and the bank?

We advocate just a plan. 

Proactive measures need to be taken to modify the loans so they are affordable to the property owner now and offer further adjustments to the banks in the future when the market recovers.

Banks have more at risk than bad loans. The prediction is the number of lawsuits arising from this epidemic of foreclosures will be worse than the fallout from the Enron scandal or the dot-com collapse.

In the past, banks were often quick to settle major claims in order to avoid costly court battles which could accelerate the number of sub-prime-related law suits.  In a rising market, it made sense to settle and put the problem behind you.  However, during a down-turning market, banks will be forced to aggressively defend themselves first with the loans they modify, the short sales they accept, and finally, the claims they respond to in court. 

They can’t afford to settle too quickly, or can they?

As President of Virtuosity Unlimited, LLC, a company committed to serving the needs of our banks and their loyal customers, I anxiously await the leadership of the banking industry to step forward and develop a plan that makes it their goal to share in the hardship with the property owners by implementing preemptive measures to educate their customers to their options and restore trust and faith in the banking system. 

Take a number.