I’ve been in the real estate industry since 1976.  I’ve seen a lot as a Title Officer.  There are people who went to jail because I discovered their fraud.  I saw the savings and loan crisis from the inside.  And I saw all the signs of the mortgage meltdown from the inside.  As a matter of fact, as a member of the management team, I refused to recruit qualified staff away from good jobs that they liked.  I only hired people who were returning to the work force or hated their current situation.  Sometimes my office would look a little like the Star Wars bar scene, but I could sleep at night.  I was right, everything blew up.  I miscalculated the depth of the mess, but I didn’t miss that it was coming.

I lost my job in the title business, but not before I studied and passed my real estate license.  I started as a buyer’s agent for a big REO guy.  I have a gift for being in front of the wave.  I found REO work to be soul sucking and after two years moved to a traditional business model.  The point being, I’ve seen a lot over the years.  And I saw this coming.  There’s a part of me that truly hates sales people.  And business.  Because the business model of more sales and more sales is what brought this country to it’s brink.  We forgot that sometimes the best sale is the one you don’t make.  A skilled, ethical Realtor knows the difference.

Unfortunately, we all lost our way from about 2001-2006.  The sales arm whittled away at the standards of the operation and compliance arm and sales were made for the sake of making sales with substandard lending standards.  Next, because the banks were caught flat footed as the market tumbled under the stress of the mortgage meltdown they hired a bunch of under paid under experienced staff who’s primary contribution to the process was the ability to sign their name.  And that’s blown up in their face.

We would like to think that the banks carefully reviewed each file and made rational, informed decisions on each home they took back.  In truth the right hand rarely knew what the left hand was doing and I think if they had someone who could sign with both hands they would have considered that a boon.

I’ve said since day one that any attorney could attack any foreclosure on behalf of the displaced homeowner and prevail.  Yes, I said that every single file has something wrong with it that could cause the foreclosure to be overturned in court.  When I was working for the REO guy we had two pulled back because the homeowner filed litigation.  Both prevailed.  And we were just one little company in one little town in this country.  In both cases the borrower was working on a modification where the bank had lost the documentation numerous times.  Five in one situation, nine in the other.  If it were the insurance business the claim would have been for bad faith the bank’s behavior was so egregious.

The banks have done a horrible job and the latest “robo-signing” scandel is just another example of how bad they really did.  But at the end of the day, in spite of all that’s going on, you still have to pay your mortgage.

Last month I sat in a presentation by Matt Vernon of BofA.  He’s the Executive in charge of REO’s and Short Sales, for the whole bank.  He laid out their go forward plan which was to, in order, modify the loan, if that failed short sale or deed in lieu and only if the borrower was unresponsive or the home was seriously not moving would they resort to foreclosure.  They expect this to be in full swing by Q1 2011. I figured out the answer before Matt was asked.

BofA is the largest consumer banking company in the country.  If they foreclose and act heartlessly today when a borrower is in trouble, that borrower will end all of their banking relationships with BofA and may never return.  BofA would be shutting the door, in an economic downturn, to millions of customers who, in a normal economy, would have never found themselves where they are right now.  Good people in a bad situation.  BofA recognized this and is positioning themselves to be the kinder, gentler big bank.  Why?  Because they want to salvage the banking relationship with minimal damage to their bottom line.  It is better to work out a short sale today and get the loan in three years when the borrower is back on their feet than to behave like a bunch of robberbarons.

I think their strategy is brilliant.  I think they will use the robosigning scandel as an excuse to implement this new policy.  It’s the time out they needed to catch up.  And while you still have to pay your mortgage, short selling will be much easier.  While the media will make a big deal calling this a “foreclosure moritorium” the truth of the matter is that most of the big banks have suspended foreclosures over the holidays for the last three years.  This is just a different way of ending up at the same place.  This should be the break that a lot of homeowner’s need.  This holiday season may end up a great time to buy a short sale and a better time for drowning homeowners to get out from under the mortgage that’s killing them.