Short Sales are Improving with the Regulators and Major Lenders
In 2011, there were 340,000 short sales with 88,000 of them in the fourth quarter according to Realty Trac. This is a substantial increase, even though it is still less than 30% of the total number of sales. Corelogic predicts that short sales will increase 25% in 2012. When you consider that Corelogic says that 22.8% of all homes in America are underwater, there are 11.1 million homeowners who may need help from Short Sales. So, there this year should be busy if you do Short Sales.
As a part if this package of good news, the Making Home Affordable program was extended through 2013, which includes the extension of the HAFA Short Sales that are part of that program. Supplemental Directive 12-02 was the subject of another chapter of Create A Short Sale, but it deserves a reference here because it eliminates the occupancy requirement for non-GSE HAFA, allows the borrowers to make full payments to preserve their credit and increases the amount that can be paid to junior lien holders. While the Treasury is improving things (thank you Laurie Maggiano), Fannie Mae and Freddie Mac have left their HAFA programs alone, which leaves some room for improvement.
In April 2011, The Federal Housing Finance Agency (FHFA) augmented its servicing guidelines to improve the loss mitigation standards to require that the borrowers be provided with a Single Point of Contact from the servicer. Servicers are famous for sending borrowers through many different transfers to find the right person to talk to. Now, there is a single point of contact for the borrower to deal with the servicer if the borrower is going through any loss mitigation program, including a Short Sale.
Several of the major lenders have created Alternative Right Party Contacts, real estate agents that the servicer mention to the borrower and suggest that the borrower consider a Short Sale. Bank of America works with Digified Transition Solutions to try to get borrowers in touch with real estate agents who can discuss Short Sales. Green River and Service Link similarly contact their borrowers to suggest contact with certain agents to consider a Short Sale.
Bank of America, Chase, Wells Fargo and Citi have all improved their Short Sale process.
Bank of America has done so many improvements that it is a separate chapter that you can see at http://tinyurl.com/bv6xvp2.
The biggest improvment is to eliminate the sequential nature of their review in Equator to allow different parts of the review to be processed simultaneously. In short, this should speed up the process. Also, their valuation dispute tool is being rolled out in April 2012 to help with the problem with bad Broker Price Opinions (BPOs). They did a pilot program offering cash incentives to borrowers in Florda to get them to do Short Sales. Since that was a success, you might see it coming to a neighborhood near you.
Chase has a long way to go to get its Short Sale program in shape. Their executives are making a big effort. Chase sent a large contingent to REOMAC in Palm Springs in March, 2012 and a major part of their presentation concerned Short Sales. If you want training in their program, go to www.Chase.com/shortsale. If you want to get more specific with their HAFA program, go to www.Chase.com/HAFA . They have also set up a system to correct problems with your Short Sale review. If something goes wrong, call the Short Sale Hotline at 866-233-5320. If you need to escalate your review, send an email to email@example.com or you can call 877-496-9025. You can check the status of your short sale on Chase’s website. Even better, they will be moving to Equator in July 2012. With the new improvements to Equator that eliminate the sequential task processing, this should greatly increase the speed of processing Chase Short Sales.
Chase has a hard working executive who does free training for Short Sales in Bonnie Boards. She is making a great deal of effort to help real estate agents work with their system. For online information, the Chase Short Sale application and a list of its required documents can be found on their website. They appoint a Customer Assistance Specialist as the single point of contact for the borrower to make the communication better. To be sure that they do not miss an opportunity to prevent a foreclosure, all foreclosures are reviewed 90 days before the sale date and again 96 hours before the sale date by an independent foreclosure review team.
Chase has developed a List Assist program to reach out to borrowers in trouble and suggest a short sale. Chase uses a Short Sale Accelorator to mail a proposal to the borrower. They can offer an incentive to the borrower of $3,000 to $35,000 to encourage the borrower to do a Short Sale. These incentives apply only to Chase portfolio loan, if they are just servicing the loan there is no incentive unless it is a HAFA Short Sale. The lucky borrowers are selected by the Chase marketing department. Chase is also sending out letters with a pre-approval similar to HAFA where there is only one loan on the property. They will offer incentives with this HAFA-like program that can be up to $10,000.
Chase has a cooperative Short Sale program where you can submit the borrower’s information and begin the process even before you get an offer for the sale of the property. One of the important things for the agent to find out at this stage is if Chase has delegated authority from the investor. In other words, can Chase make the decision on your Short Sale if it meets certain guidelines without submitting it to the investor. If so, your review will be quicker. Also, ask the negotiator if there is any incentive that can be offered to the borrower, as they are aggressive with their offers to encourage Short Sales.
Chase’s goal is to get Short Sales approved in 25 days. While I really liked the people that Chase sent to REOMAC, my experience with Chase is that they are one of the slowest firms when it comes to reviewing short sales. If they get it down to 25 days, I will love it.
Wells Fargo actually believes that their Short Sales will decrease in 2012, partly because 92% of the loans they service are currently being paid on time. One of the things that Wells Fargo is proud of is that they will postpone 80% of the foreclosure sales if there is an offer to purchase the property and if you get the Short Sale package to them 10 days before the foreclosure. Like the other lenders, Wells Fargo is sending out letters to their delinquent borrowers to suggest they consider a Short Sale and offer an incentive that can be up to $15,000. These letters mention three real estate agents near the borrower who could help with a Short Sale. I am in the Wells Fargo letter for my area. These letters and offers are only made on their portfolio loans, which is only 5% of the loans that they service. There are no incetives on the loans where they are just the servicer unless it is a HAFA Short Sale.
Citi Mortgage has fewer loans in default than the other lenders, so they are not as aggressive in encouraging Short Sales. Citi does mail letters to their delinquent borrowers and they offer incentives. However, they will not reveal the range of their incentives. They have also set up call centers to contact their delinquent borrowers to encourage resolution of delinquent loans, including suggesting a Short Sale. If you have a Citi loan that is owned by Fannie Mae, Citi has an on site Fannie Mae support team that you can reach by calling 866-520-5499 to expedite the Short Sale review.
The beginning of Create A Short Sale is full of horror stories of the difficulty in completing a Shsort Sale. There has been a long evolution of improvement in the process. Now, the regulators are improving the Short Sale process. The major lenders are encouraging their borrowers to engage in short sales and streamlining the process. The life of a Short Sale agent is considerably better and there is hope for the future.