Realtor, home seller baffled when bank rejects its own offer
VANCOUVER, Wash. – Stacy Baker fought for two years to sell her father’s house and to keep it from being auctioned off, but lost the fight even after her real estate agent said an offer was made to the bank that met its own conditions.
Baker’s father was 61 when he succumbed to complications from a heart transplant, and she said her father probably realized “it was the wrong decision after he bought it.”
Baker’s real estate agent, Aaron Signor, first tried to sell the house for about what was owed, but at $179,000 it didn’t sell. Over the following months, they lowered the price and got an offer at $134,000.
But Flagstar Bank, which services the mortgage on the house, rejected the offer, saying the house was worth $150,000.
Signor said several more buyers made higher short sale offers but they too fell through.
“We procured an offer of 165 (thousand) at one point, which the buyer found out, that with the condition of the house, it wouldn’t qualify for their loan. They walked,” he said.
Signor said the buyers were going for FHA loans, which only require low down payments. FHA is government-backed money but it comes with a lot of strings attached. For instance, the home has to be in good condition.
The home inspection for Baker’s house, however, found the roof in bad shape, plumbing and electrical problems, lack of insulation and the deck in need of replacing.
Signor said none of his buyers could meet that $150,000 Flagstar Bank threshold because mortgage brokers determined the house didn’t qualify for FHA money due to its condition, meaning in the eyes of the FHA the house wasn’t worth $150,000.
But then just days before the Baker house was set to be auctioned off, Signore said he brought Flagstar a viable $150,000 non-FHA offer, which is just what Flagstar asked for.
“Even the processor at the lender – Flagstar Bank – she thought, ‘Hey, you got an offer full price, we’ll get the foreclosure stopped; we’ll make it go away; we’ll have a sale.’ She calls me back and says, ‘sorry.’”
Signor was so confused, he began digging deeper and found the loan on the Baker house was held not by Flagstar but by Fannie Mae, which is another government-sponsored organization. It buys loans from banks with the goal of adding “stability to the housing and mortgage markets.”
It’s that quasi-governmental enterprise that, along with Flagstar Bank, said, “No,” to allowing Stacy Baker to sell her father’s house.
“Why would they foreclose on a home when they have exactly what they just said, “Yes,” to in their hand and opt to foreclose instead?” Signor asked.
Baker signed a waiver so Fannie Mae could speak to a reporter, but the organization still declined to do so, leaving the taxpayer wondering what is going on; instead, Amy Bonitatibus, spokeswoman for Fannie Mae, said in a statement: “Fannie Mae’s top priority is to keep borrowers in their homes. … Unfortunately, foreclosure is the only option when all other foreclosure alternatives have been considered and exhausted.”
Fannie Mae told a reporter to speak to Flagstar. The bank’s senior manager, John Matthews, said, “We as a bank would have no comment on a specific file with you. I appreciate your investigative efforts, but this matter would not be for public discussion.”
So on a bitter cold Friday morning in Vancouver outside the Clark County Building, the Baker house went up for auction. Flagstar bid a dollar more than the one bid from the public and took back the home for $200,001.
The home now sits empty.
“Until they are going to put back on the market, the homes they’re going to foreclose on or are foreclosing on, there is no recovery,” said Signor.
Through research, a reporter learned Fannie Mae has a concern that if it lets houses go in short sales too cheaply it will hurt surrounding homeowners and their home values.
It was also learned that Flagstar received $266 million in government bailout money.
The economic incentives banks have to foreclose
Ira Rheingold, with the National Association of Consumer Advocates, said, “The whole foreclosure process is a profit center for servicers like Flagstar to the detriment of homeowners and often times to the detriment of investors.”
He said the longer Flagstar can stretch out the foreclosure process, the more fees it can collect.
“It makes no economic sense when you think about the scenario that you described. If you take a step back, though, and you take a look at where Fannie Mae is today, one of the things Fannie Mae is attempting to do is to avoid the appearance that they have less money than they actually have,” Rheingold said.
“All these losses can’t hit the books,” said Signor. “It’s better for them to take it back into inventory, close the doors, winterize it and sit on it, rather than take the loss.”