Fannie & Freddie Say 30 Days for Short Sale Review, 60 Days Maximum for Raleigh, Durham, Cary & Wake Forest North Carolina
The only thing short about a short sale is the payment on the existing mortgage. The time for review is way too long. To correct this problem, Fannie Mae and Freddie Mac issued new guidelines to their servicers. See http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1209.pdf for Bulletin 2012-9 by Freddie Mac. Similarly, see https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2012/svc1207.pdf for Servicing Guide Announcement SVC 2012-07
The servicer is supposed to respond to the submission of a short sale package within 3 business days. From the time a complete package is submitted, including a proposed North Carolina Offer to Purchase and Contract and Short Sale Addendum, the servicer is supposed to respond to the proposed short sale within 30 days. If the servicer does not approve or disapprove the short sale within that time limit, the servicer is required to give the borrower a weekly report until there is a decision. The regulations say the decision must be made within a masimum of 60 days.
Are all the servicers in compliance with this requirement? Are you kidding? The last one I talked to on a Freddie Mac loan for a Raleigh Short Sale listing laughed when I pointed out this regulation, then said it would take 90 to 120 days.
Other programs like Home Affordable Foreclosure Alternative (HAFA) specify that the servicer is supposed to respond the the short sale offer within 30 days if you have a HAFA approved short sale in process. Watch this video for a better understanding http://www.youtube.com/watch?v=qFH6tpdAZXI
Once the servicers get into compliance with these requirements, short sales will become much more acceptable to buyers. The number of buyers who will wait 30 days for an answer is much higher than the number of buyers who will wait 6 months. Any suggestions on how to get wider compliance with these rules?
If you own property in NC or are in the Research Triangle area and perhaps may need to Short Sale your home or business, please call or email Tim to request a confidential appointment regarding your specific requirements to Short Sale real estate in Raleigh, Durham, Cary, Wake Forest or other surrounding Research Triangle area towns in North Carolina.
Short Sales Need Artful Negotiating
Negotiating a short sale requires an understanding of the process. When you submit the short sale package, you are dealing with a servicer, who collects the payments and administers the loan. They do not have as much “skin in the game” as the investor who owns the loan. So, you need to be able to involve the investor to get the right result.
How do you find the investor? You can ask the servicer. Sometimes they will not tell you if you ask “who is the investor”? However, some servicers like Bank of America have rules that if you ask a question that can be answered yes or no, they will answer. So, ask if the investor is Fannie Mae? If no, ask is the investgor Freddie Mac? You might get lucky.
The Internet provides an abundance of information. To see if the investor is Freddie Mac, go to
www.freddiemac.com/mymortgage and look it up. You can also call them at 1-800-FREDDIE (8am to 8pm EST). Similarly, to find out if the investor is Fannie Mae, go to www.fanniemae.com/loanlookup or call them at 1-800-7FANNIE (8am to 8pm EST). This brings up some legal requirements.
In order to use the online services for Fannie or Freddie, you need written authorization from the borrower. So, include this in your letter of authorization that you get the seller to sign at the first meeting, so you are not only authorized to talk to the lender, but you are authorized to look up the investor on the Fannie, Freddie or any other website.
What if Fannie or Freddie are not the investor, which is a frequent even for luxury housing. Many servicers will not tell you who the investor is, possibly because they do not want the investor to know how poorly they are processing your short sale request.
However, many servicers have rules that require them to furnish the investor’s information if the borrower/seller requests that information in writing. So, add that to your letter of authorization, i.e. the borrower requests the lender to furnish you with the name, address, phone number and contact person for the investor who owns this loan.
Some commentators say that another way you can find the investor is to look them up in MERS, the Mortgage Electronic Registration System. It allows borrowers to see which company manages and owns their loan. The site was made public as part of The Helping Families Save Their Home Act. The claim is that the site will inform borrower’s when the ownership of their loan changes. However, the only part of the site that is directed to homeowners allows you to check the servicer of your loan. How to check the owner is well hidden. So, if you can make this site work, please leave a comment on this post so we can share this service with everyone.
Why do you want this information? I was dealing with Bank of America/Countrywide on a California short sale. They were taking way too long to assign the request to a loss mitigation negotiator. Wells Fargo had the second loan on the property, and they had already assigned their short sale request to a negotiator, obtained a Broker Price Opinion (BPO) and were ready to negotiate a short payoff. Meanwhile, Bank of America/Countrwide is still waiting to get it to someone’s desk to order the BPO. On my weekly phone call, I made it clear to the “gatekeeper” that a written request to get the contact information for the private investor who owned the loan had been submitted. She found a way to order the BPO immediately to speed up the process. In other words, when the servicer knows that their client, the investor, will be looking into how the short sale is being processed, the servicer wants to make it look better.
If you want to get more tools for negotiating in real estate, look at my book, Create A Great Deal, the Art of Real Estate Negotiating by going to http://www.CreateAGreatDeal.com
The first place you negotiate is with the loss mitigation department, and hopefully you get what you need. Sometimes, you run into problems, like having them turn down the short sale with no response. In other words, they just turn you down, but do not give you a counter offer to work with. This is particularly upsetting if you are facing a foreclosure. So, how do you stop the foreclosure?
It is extremely unlikely that the loan belongs to the lender you are dealing with. On average, banks keep only 15% of their loans. So, there is an 85% chance that they are only servicing the loan. When the payments are not being made, they have lost the servicing income and want to get it back to producing income for the bank either by reinstatement or foreclosure.
So, when you have a problem with the lender that is servicing the loan, go around them to the actual investor. The investor’s motivation is different from the servicer. Instead of looking at a lost income stream, the investor is trying to get as much principal back as possible.
If you can get in touch with the loss mitigation negotiator at the servicing bank, just ask who is the investor. They do not have to tell you, but if you establish some raport before you ask, they might. If they do not tell you, change the subject, talk about something else, then casually ask them what team they are on. The lenders divide their loss mitigation departments into teams based on who the investor is, so the team members only have to learn the rules of one investor. Once they tell you what team, you know the investor.
If you cannot get the information about the investor directly, play the odds. If the loan is within the limits of a conforming loan, it is most likely Freddie Mac or Fannie Mae. Start with Freddie Mac by going to www.FreddieMac.com, because there is only one loss mitigation department in Freddie Mac, in McLean Virginia. If Freddie does not have it, try Fannie Mae at www.FannieMae.com. They have five offices. The office that will regulate your lender is the one closest to its headquarters. So, figure out which one is the closest to the headquarters and call.
If it is a HUD or a private investor, they are much harder to find.
Once you get in touch with the investor, they may have more interest in accepting your short sale. They will need to get in touch with the servicing bank to postpone any foreclosure and discuss the acceptance or counter offer to your short sale proposal. In other words, it is not the end of the line if he servicing bank will not work with you. Try the guarantor, as we discuss elsewhere in this website or try the investor. The investors and guarantors may have a different reaction to your proposal.
These are some of the most beautiful words in the Fannie Mae Servicing Guide:
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales. (Part VII Section 504.02)
You need a translation from Fannie Mae speak to Realtor language. Preforeclosure is Fannie Mae’s term for a short sale. As long as the total commission is 6% or less, Fannie Mae as the investor is directing the servicer to leave the commission alone.
I have grabbed the microphone at REOMAC meetings to question the practice of cutting Realtors commissions. I have button holed Fannie Mae and Freddie Mac executives to discuss this practice. I lead an ovation for the Freddie Mac executive on a Short Sale panel who said they did not want the practice of cutting Realtor’s commissions to be allowed. I questioned a short sale panel that was so proud of paying a closing attorney extra money when the attorney worked to help loss mitigation, yet they condoned cutting the Realtors commission, and objected to me getting paid when I advised Realtors how to work their way through the short sale process.
Fannie Mae has said that Realtors are not to be treated like dogs.
Why is this important to the homeowners? Because it is the Realtor who is taking on the challenge of selling the home, getting the buyers to put up with the delays in a short sale review, and negotiating with all the lien holders. If the Realtor knows that the commission will be cut, they are much less likely to take on this task that is much more difficult than a traditional sale. If the Realtor knows that they will be properly compensated if the sale closes, there will be many more short sales with their benefit to the borrower, the lender and the neighborhood.
In an individual case, the bank will make more if it steals some of the Realtor’s commission. That is what CitiMortgage did to me in the short sale of a property on Crest Road in Rancho Palos Verdes, California. By negotiating in a questionable manner, they withheld approval of their short payoff until everyone else was up against a foreclosure deadline. Then, they would only approve a much larger payoff than allowed by the first and the second loans, so the only way to accomplish that was to have the Realtors pay CitiMortgage. Their negotiating trick left no time to get the situation corrected. In this one situation, they made more money. I have not done a short sale involving Citi since. Also, I disclose this experience to any Realtor that I educate on short sales. I will not do a short sale where Citi is involved unless they are representing a loan where Fannie Mae or Freddie Mac is the investor.
So, Citi made $25,000 more in this one situation. I will bet that they are losing many other short sale opportunities, where their total loss dwarfs the one time savings.
Fannie Mae has done an excellent job of emphasizing the long term benefit of short sales and eliminating the short term gain of stealing one commission. If Realtors know they will not have a commissionectomy, it is much more likely that they will do short sales.
Thank you Fannie Mae.