San Jose Mercury News’ Marketwise Q&A: Are Loss-Mitigators Costing Banks Big Money at the Back End of the Housing Slow Down?

Pat Kapowich for SJMN’s Market Wise Column

By Pat Kapowich

Q: We made an over-list price offer on a short-sale listing that was still occupied by the sellers. Our offer collected dust for more than seven weeks on the desk of the lender’s loss mitigator. Frustrated, we pulled our offer. Sure enough, the poor family went through the foreclosure process. Now it’s been relisted as a bank-owned home with a different realty company for $30,000 less. Once again, we put in an over-list price offer, which is also collecting dust on someone’s desk. What is going on?

A: A: Loss mitigators supposedly know all about real estate financing and can help prevent a foreclosure. They think they are saving their bank thousands of dollar in additional losses on the disposal of each property by employing deft negotiating skills. Unfortunately, every day these individuals convince the real estate community and their clients that they actually cost banks big money. Their delays result in losing the best buyers and sale prices, which also repeatedly create lower prices in a given neighborhood.

The vanguard of this housing mess was the army of commission-only loan officers who were handing out the bank’s lousiest loans. This resulted in the lender’s having to pay for outside asset management companies or in-house loss mitigators. It is bad business to engage in risky lending. It’s also bad business for the banks that should have hired a small force of better-trained loss mitigators. Had they done so, neighborhood values would have improved and so would the bottom line of lenders.

Pat Kapowich,, owns Kapowich Real Estate in Sunnyvale. Send questions to