We recently closed another short sale. This short sale lender was so much more fund to work with than most lenders. The loan was owned by Household Finance, which is a division of the international lender HSBC. We were assigned a short sale negotiator about 30 days after we submitted the short sale application. The short sale negotiator responded to us quickly.

If we sent her an email, then we received a reply within a day or two. Contrast that with waiting for a week or more for a reply to an email with other lenders. The short sale negotiators at the big national lenders often take a week or more to reply to an email or voice mail. Now, I am sure you are wondering why this is happening?

Why can't the big national banks do a better job on short sale? Here is what I think. I have noticed one big difference between the loans that the big US based banks have and the loans that HSBC has. HSBC owns their loans. If they don't handle short sale negotiations properly and lose money as a result, then that affects their bottom line. HSBC stands to make or lose money as a result of their actions.

Contrast this with the large us based banks. One large national US bank does not own 80% of the loans they handle. Who cares if things are being handled properly? It's no big deal when a short sale is denied and sells for 40k less a foreclosure. They aren't losing the money. Someone else is. The sad thing is that usually that person is Uncle Sam. This is because Uncle Sam owns or insures about 65-70% of all the mortgages in America. Fannie Mae and Freddie Mac own about 55% of all US mortgages.

The rest are insured against loss through FHA, USDA, and VA. If an FHA loan goes bad, then FHA takes the loss. Many experts are saying that FHA will need a bailout soon. They estimate that FHA could lose up to 50 billion in coming years. This means people buying a home today will pay more for an FHA loan. Uncle Sam may have to bail them out. The big national banks could do a better job ad short sales and other aspects of loss mitigation.

That would substantially reduce the losses on bad loans and help Uncle Sam avoid another bailout. 

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