Loan Servicer Math...Fuzzy Math Over at Carrington Mortgage Services (CMS) On a Loan That Was Sold Off To Investors As a Security.

This Julington Creek Plantation short sale deal could have been a template for how short sales need to look.  We got the contract on the property very close to fair market value.  We had an active marketing history that showed why this was a great contract.  Comps in support of the price.  Owner with a true, and permanent, hardship.  The short sale package was over 100 pages when all was said and done.  We provided  all of the financial information possible...all of it illustrated the hardship.

Our file was complete from the beginning and no one ever had to request additional information from us.  This was about as perfect as a short sale could be.

The buyers had gone ahead and gotten the appraisal done.  The appraisal came in at a couple thousand over our contract price.  We sent the appraisal to Carrington.  We were told that the BPO done by Carrington Mortgage Services came in slightly more, but in the same range.

We waited, and waited.  At one point we were told that the negotiator would have an answer for us within two weeks.  Then Carrington shut down their short sale operations in one city...so we waited for the file to be reassigned to a new negotiator out at their California operations center.  They kept giving us sad, sad stories about how the negotiators had hundreds of files on their desk.  (Not inclined to feel too sorry since I had a seller up against foreclosure.)

When we finally got the negotiator to answer his phone (after calling him for weeks with no response) we were blown away by what he had to say.  The CMS negotiator was telling us that even though our contract was at fair market value, it would be in the investor's BEST INTEREST to foreclose.  How exactly does THAT work in a declining real estate market with a fair market value deal on the table?  The negotiator further told us that they needed a net proceeds amount that exceeded both the Carrington BPO and the buyer's appraisal by far!  Now at least Carrington was diligent in informing us that even if we got that 20% above fair market value contract (where it would have to be to meet their "net" demand) they were asking for, they were not guaranteeing an approval because at that point the investor would have to sign off. 

THE INVESTOR NEEDS TO SIGN OFF NOW!  NOT HAVE SENIOR MANAGEMENT AT CARRINGTON MORTGAGE SERVICES BLOCKING WHAT IS A FAIR MARKET VALUE DEAL.   To read the whole Rejection of FMV Contract Letter from Carrington Click Here:  Carrington Rejection of FMV Contract Letter  If the loan goes into foreclosure, can they really expect to get above fair market value?  They will get less and there will be all of the foreclosure related expenses adding to the investor losses.  BUT Carrington Mortgage Services, who is just the servicer, stands to gain financially in a foreclosure even though the investors will lose.

Contacting the "Customer Advocate" department got us nowhere even though, to my delight, they DID admit the above in writing when it had been verbal up until that point. Another useful thing we got out of this was the name of the actual security that this mortgage was supposedly sold off as a part of.  According to Carrington, this loan is part of:  Carrington Mortgage Loan Trust/Series 2006-NC3

New Century originated the loan.  Carrington Mortgage Services is servicing the loan.  Wells Fargo is trustee according to the 8k filed with the SEC.  Coincidentally, Carrington also gets to service the loan if a foreclosure occurs.  It is in Carrington's best interest to not allow the short sale so they can continue to collect fees on this loan from investors who think that the servicer is looking out for their best interests when the servicer is looking out for the servicer's best interests.

Where is the oversight?  Investors...WAKE UP!!! 

A hint for anyone out there...their "Customer Advocate" department is actually a "Carrington Advocate" department.  The lady in that department was with New Century Mortgage before Carrington.  She has been with Carrington for ten years...But WAIT...her Linked In profile says that she is still with New Century Mortgage as well as Carrington.   I was surprised to see any mention of  New Century Mortgage since it was my understanding that they were shut down by regulators for their lending practices and then went bankrupt in 2007.  New Century Mortgage is who originated this loan that my seller has.  I started doing further research...New Century is not in business...or they ARE in business...or they are not really themselves...then just had to put it on hold in the interest of getting this blog post done today. 

Read this recent Forbes article for more on Carrington Mortgage Services and why this type of thing is probably happening: http://www.forbes.com/2009/08/22/carrington-capital-mortgages-business-wall-street-carrington.html

UPDATE!!!
Since posting this article, I have gotten calls from other agents about their Carrington Mortgage Services short sale deals that were rejected. One agent told me that she was told verbatim the excerpt from the letter above. In both of her rejected deals, Carrington asked for $15,000 more than the established Fair Market Value. Are any investors of this Carrington Mortgage Loan Trust out there?

My seller went on to file bankruptcy after this post. At the time of filing, they were over a year late and Carrington had previously modified their loan (around the time we started the short sale process) even though the homeowners had rejected the loan modification proposed by Carrington since it was not meaningful and would not help. Carrington sent them loan modification paperwork anyway, which the sellers refused to sign. Carrington still "modified" their loan, brought them up-to-date on their payments and started billing them for the "new amount". Even though no foreclosure suit had ever been filed or even a lis pendens...Wells Fargo (trustee for the group of Mortgage Backed Securities) filed a request for relief of stay in the bankruptcy.