Lender opening bid price

[Will Crozier]

George,

I've been searching google the past few days looking for info about how lenders set their opening bid price. More specifically, I've been trying to find out why they discount certain properties below the loan balance.

Do you have any resources or ideas as to how lenders set their opening bid price?

Thanks in advance!

[Steve Smegner]

Will,
In my experience when talking with lenders, it seems that every lender I have spoken with seemed to look at things differently. In some cases the 'lender' is just the loan handler and there is some investor behind that loan. I was dealing with one short sale and loss mitigation had to keep going back to talk to the 'investor'. I never knew who that investor was. I think the BPO, if done, has an impact. In another situation a lender did a BPO, then they ordered an appraisal, but the property was in such sad shape that they did not want it back and on their books. So they did not proceed with the foreclosure. I guess in their case a non-performing loan on their books was better than an REO is sad shape. And with some banks I called it seemed that each person I spoke with had a different opinion. A lot of these folks are not bank employees but contractors. I had an experience with Wells Fargo on a short sale that ended up with loss mitigation passing the sale over to a 'loan negotiator' that was a contractor. When I have been to auctions it seemed that in most cases the bank would bid the 'payoff' amount. In a few cases the bank bid way below the amount listed on FLS. But as George stated in another thread, Texas is a non-disclosure state so knowing the real status of the loan is not discoverable without a release from the borrower. You never know if some borrower paid down their mortgage at some point along the way. I have done that myself. If you looked at the mortgage on my house and projected the balance based on the terms, my actual balance is way below that amount. If my property went into foreclosure and FLS made the best assessment using the available information the mount they showed would be way high. That is not anything against FLS. It is just a projection based on what public information is available.

[Will Crozier]

Steve,

Excellent information. Thank you for taking the time to post that. It is greatly appreciated!