As an active Realtor for more than 20 years in Cape Coral, Florida, and as the former collection/recovery manager for the largest bank holding company in Southwest Florida, I am compelled to write this letter regarding the lending industry debacle, especially as it pertains to real estate. Over 20 years ago I managed a department which was responsible for the liquidation of foreclosed and repossessed properties, and other “problem” loans made by 32 affiliated banks in S.W. Florida.

I’m well aware of how the “troubled” loan process works. We believed in minimizing our banks’ losses by making sound, educated, timely decisions.

Now that countless borrowers are in financial trouble due to the ease of borrowing money in recent years (when loans shouldn’t have been granted to many of them in the first place) and the subsequent softening of the real estate market, I’m at a loss as to why a lot of lenders are handling things the way they are. Some lenders understand today’s industry issues and the real estate market, and are making good decisions.Unfortunately, they seem to be few and far between.

The other lenders keep hurting themselves and their borrowers. I’ve had too many very bad experiences with “loss mitigators” at lending institutions who are overwhelmed with “short sales” and pending foreclosure files. I’ve come to the conclusion that most lenders are severely understaffed with unmotivated personnel who can’t, or won’t, make logical, timely decisions regarding distressed borrowers. It is incredibly frustrating to sellers, buyers and realtors.

In our area, there are numerous “short sale” properties on the market, whereby the seller’s lender hasn’t obtained, nor reviewed a new hardship package (updated financial statements, recent tax returns, bank statements, etc.), therefore the lender doesn’t know if the borrower/seller of the property is a bona fide candidate for a “short sale,” deed in lieu of foreclosure, re-finance, or any other means of relief.

Instead, these lenders tell their borrower/seller to put the property on the market and “bring them an offer.” Then, when an offer materializes, the seller’s lender must ship the hardship package out to the seller, receive it back completed, review it, get an updated appraisal or BPO (brokers price opinion), and possibly have personnel

Further up the chain of command render a decision on a course of action. Meanwhile, the potential buyers get tired of waiting around while other good properties pass them by, withdraw their offer, and pursue something else without having to deal with the time constraints.

This is not the way to go about the process. Had the lender been proactive and taken the appropriate steps prior to the property being placed on the market, intelligent, timely decisions could have been made (of course, provided the lender has enough capable personnel in place), eliminating all of this wasted time and effort.

I’ve had some lenders tell me they will not, under any circumstances, allow a troubled borrower/seller to “short sell,” do a “deed in lieu,” refinance or offer any form of relief and instead insist on foreclosing, because “that’s their policy.” Common sense tells you in a declining market it’s more sensible for the lender to accept a deed in lieu or allow a borrower/seller to short sell their property (if they truly cannot afford to continue making their payments), for a higher price in today’s market rather than sell for a lower price several months later, when foreclosure process has been completed. Not to mention that the borrower’s credit rating isn’t as negatively impacted if they avoid foreclosure.

Also, during the foreclosure process the borrower/seller’s debt continues to mount due to attorney fees, court costs, unpaid accruing interest, late charges, “force placed” insurance, etc., so why not allow the liquidation of the property now? I’ve been told recently that on average today $35,000 to $40,000 is added to the loan balance on foreclosed properties.

It is also imperative that lenders hire appraisers or Realtors (for BPO’s) who have their finger on the pulse of today’s market, not yesteryear’s. In a rapidly changing market, I’ve seen some ridiculous opinions of value. If a property isn’t selling, even with aggressive marketing, the seller’s lenders need to allow it to be priced realistically. Lenders shouldn’t consider themselves to be in the real estate business, and need to be realistic about their price expectations. I’ve had recent short sale listings, where a very good offer had been accepted by the sellers, only to have their lender reject them. The seller and lender ultimately had to settle for a substantially lower offer later on due to the declining market.

Some time ago I brought a very good offer to a seller who was in a short sale situation and he gladly accepted it, contingent on his lender’s approval. Four months later the seller’s lender rejected it (it was the most patient buyer I’ve ever seen), only to accept an offer later on for $45,000 less, due to the drop in the market.

I also don’t understand why many lenders feel inclined to penalize Realtors by cutting our commissions, when we’re trying to help banks and property owners out of their dilemma. I was recently told by a seller’s lender that we’d have to reduce our fee by more than half, since they were taking a hit on their loan. So, for doing an exceptional job of bringing forth a qualified buyer who is willing to offer a fair price in this market, they want to penalize us. I don’t get it.

With a huge oversupply of property on the market, there are plenty of properties to choose from where we don’t have these issues. Sales are fewer anyway in a soft market, so why would we want to reduce our fees? Seller’s lenders should be rewarding us, not penalizing us, and remember, we didn’t make the loan in the first place, nor did we collect any of the ‘up front’ fees lenders received.

Word is out now regarding the unacceptable delays and many seller’s lenders inability to make logical decisions, as well as the fee cutting they expect from Realtors. I’ve heard from numerous buyers and Realtors that they avoid short sales at all cost, due to headaches involved. That doesn’t bode well for these lenders, or the sellers.

Some short sale properties are priced ridiculously low, because sometimes it’s the only way to lure buyers into seeing it, due to the negative stigma of being a short sale. Then the seller’s lender, of course, rejects offers on it because it’s priced too low to begin with, so nobody wins. The glut of artificially low-priced short sales contributes negatively to the already soft market, and does nobody any good.

For reasons I’ve mentioned, many borrowers/sellers are giving up, walking away from their properties, and are being ruined financially. I understand that many lenders are also trying to survive, but being short sighted isn’t going to help.

As widespread as these problems are, everyone is losing due to the way things are being done. There is a desperate need for change. Lenders need to be appropriately staffed with positive, result oriented, logical thinking, personnel. “Loss mitigators,” who have absolutely no incentive, and too many files to handle, won’t get the job done.

With the unemployment rate being what it is, I have to believe there are plenty of quality job candidates to choose from. Remember the old saying “you get what you pay for.” These lenders are losing more money due to having too few, and unqualified employees making bad decisions which impact people’s lives, and the lender’s bottom line.

My last comment is that recently, many lenders have now done an about face and are making it too difficult for credit worthy borrowers to obtain financing. This doesn’t help when today’s borrowers could be buying property, thus helping reduce the amount of ‘inventory’ on the market.

Thank you for your consideration.



— Bob Osborne, senior sales associate