Prashant Gopal and John Gittelsohn, Bloomberg
Tom Axon’s mortgage-collection firm gets about 25 calls a day from delinquent homeowners’ brokers seeking approval to sell their houses for a loss and avoid foreclosure. We’ll help, his staff tells them, as long as we get paid enough.
Axon, working with co-investors, buys distressed U.S. home- equity loans and other junior real estate liens, often for pennies on the dollar. Investors like Axon have to be dealt with whenever a home is sold in a short sale, a transaction in which the lenders agree to accept less than what’s owed on the property.
“The short-sale brokers know us — they know we’re not cupcakes,” Axon, 60, chairman of Jersey City, New Jersey-based mortgage-servicer Franklin Credit Management Corp., said in an interview. “At the end of the day, my friend, you signed a contract. You owe money and we’re willing to reach an accommodation that is commensurate with your ability to pay.”
Tough bargaining by second-lien holders is delaying deals and killing some short sales, even as banks embrace the practice to avoid costly foreclosures and help clear the market of homes that are worth less than the loans on them, said Vicki Been, a New York University law professor who has studied mortgages.