REO Settlement Speeds Up Short Sales
One of the problems with short sales is to get a buyer to make an offer and wait until the lender approves that short payment. The Attorneys General of nearly every state in America are in the process of settling litigation with all the major banks over violations of the foreclosure procedures. However, this settlement that is primarily designed to straighten out the sale of bank owned properties (REOs) appears to include a component that will speed up short sales. The quicker the processing, the more buyers will “stay the course” and the more short sales will close.
Realtor Magazind quotes an article in the Real Estate Daily News that says
As part of a settlement with state attorneys general, the five largest mortgage servicers are adopting new requirements for short sales, which is expected to speed-up what has been known as a lengthy process.
Here are some of the new requirements for servicers under the settlement:
- Servicers must provide borrowers with a decision within 30 days after receiving a short sale package request.
- Servicers will be required to notify a borrower, also within 30 days, if any necessary documents are missing to process the short sale request.
- Servicers must notify a borrower immediately if a deficiency payment is needed to approve the short sale. They also must provide an estimated amount for the deficiency payment needed for the short sale.
- Servicers are also required to form an internal group to review all short sale requests.
- Banks will be considered in violation of the settlement requirements if they take longer than 30 days on more than 10 percent of the short sale requests. Violations can carry fines of up to $1 million and $5 million for repeat offenses.
This article spreads good news. One of the problems with short sale’s loss mitigation departments is that they are understaffed, so the overworked negotiators have a hard time handling their case load. If there are penalties of $1 million to $5 million, the lenders should greatly expand their staff to spend the money on good employees who will be a benefit to their firm instead of paying penalties. When you consider that a lender makes between 20% and 30% more from a short sale than from selling the same property after a foreclosure, this expansion of the loss mitigation department will benefit the lenders tremendously. At the same time, it will benefit sellers who will get quicker approvals, buyers who will be able to move in more quickly and Realtors who will have a smoother process and more closings.
This sounds like good news to me. How does it sound to you>