HSBC Horror Stories

A friend in Virginia said this about attempting a short sale and his dealings with HSBC:

“Through job loss and a long period of serious illness that had a devastating impact on our finances, my wife and I found ourselves in a situation where we feared we would not be able to continue paying for our home. My salary was cut in half, and my wife too ill for us to depend on her income. We had already begun to supplement the mortgage with money from our savings. Trying to avoid disaster, we put the house on the market. But we weren’t panicked yet. We had plenty of savings. We had taken out a 2nd mortgage a year earlier to make some additions to the property which we thought would only help with the resale. But we were pretty confident we could sell.

Two of our neighbors had recently sold and done well. But right around the time we went to market the housing market was starting to dive, and dive hard. We put the house on the market and for two years (2006-2008) we tried to sell it without any luck. We worked with a very good realtor who knew the Washington DC suburban market very well. We priced aggressively to sell, we repainted, we updated, we consulted a “stager”. But the market was just stagnant, dead. After about 18 months, we were even willing to sell at a loss of $30K, but didn’t have the money to do more than that at settlement. We had not missed a mortgage payment, but we were running out of options and money.

Talking with a good friend in the mortgage industry, it was suggested that we contact our lender (HSBC) and work with them try to short sell the house. We went to a HUD website, read about short sales and then through HUD were put in touch with a credit counselor, who reviewed our financial status, and eventually acted as an intermediary in approaching HSBC. We were put in touch with someone in HSBC’s loss mitigation group, who agreed to support the short sale, dependant on their approval of an offer, an appraisal, and a hardship letter and a bunch of financial data from us. We submitted every thing they asked for, kept them apprised of our progress.

After trying to short sell for 5 months we finally got an offer. The buyers, a relocating family, were non-contingent, had financing secured, and were willing to go to settlement as quickly as we could. Our mortgage was $700K, with a first trust of $550K and a 2nd (both with HSBC) for $150K. The buyers agreed to offer $590, pick up any points. We sent the formal offer to HSBC with all the accompanying paper work they requested. They sent out an appraiser and told us they would be in touch.

I took them 2 months to get back in touch with us. I called the Loss Mitigation rep I had been working with and he told us everything looked good, although he would not tell us what the house appraised for. He then told us that HSBC would take the deal, only if we agreed to pay $1600 per month for 5 years. It was a high pressure, scare tactic approach. He began to go over our expenses, but wouldn’t share the document he was working from. I reminded him that he had told my wife that HSBC was not looking to recover the 2nd trust, but to cut their losses on the first. I told him we were willing to pay back some portion of the 2nd trust, but that we could not afford $1600 per month, and that it was a ridiculous amount. After a lot of insults and histrionics from him, I told him to send us an offer in writing and we would look at it and get back to him. He refused to do it, and told us that he would recommend our short sale offer not be accepted. We were dumbfounded by the guy’s attitude. He didn’t seem to care about the offer either way. So, we went to a highly respected real estate attorney in the area and had him negotiate with the bank. He advised us to move out of the house, and to stop paying on the mortgage—which we would have soon had to do anyway, as our savings were just about gone. He tried for weeks to contact HSBC and negotiate a settlement, while the buyer patiently held on. To make a long story short, the bank wouldn’t budge (their counter offer, $1000 per month at 3% for 10 years) seemed designed for us not to take. Our attorney, who had been practicing law for 25 years could not understand it. He was as dumbfounded as we were. He thought dealing with the Loss Mitigation rep was a waste of time.

Eventually, the buyers purchased another property. Our attorney sent HSBC a letter (faxed and mailed per HSBC) basically telling them that since they would not take the short sale offer, that they could foreclose on the house as we had move out and had the house professionally cleaned. He requested a deed in lieu of foreclosure, and that HSBC they should work with him directly as he was representing us in this matter. HSBC has never replied.

So now, the house has been vacant for 5 months. HSBC has not foreclosed, and calls us several times a day. At first, we’d take the calls, telling them the situation each time and referring them to our attorney, as he had instructed us to do. For a while, HSBC called the attorney too, asking him the same questions about the property, he explained the situation a few times and then asked them to stop calling unless they were planning to take some action. HSBC continues to call us several times a day. But we stopped taking the calls. This all seems so crazy. We feel like we tried to act responsibly in a bad situation that was largely beyond our control. It wasn’t ideal for us or HSBC, but we did everything the HUD website we initially went to had advised us to do.

We have no idea what is going to happen next with HSBC, or why they did not take the deal. Are they going to come after us for a judgment, or send us to collections agency? It’s history now. But we’re left wondering what are they doing? Is this some sort of strategy on their part? We’ve bought and sold several homes in our lifetime, but we never dreamt we would find ourselves in a situation like this at this point in our lives.”