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
Short sales is all about helping people who have had hardship. I get lots of calls from well heeled investors who want the bank to take the loss that they should be taking. A short sale is for people who have had a financial hardship, not the wealthy who want to reallocate their loss. Short sales can be done on investor owned property as well as owner occupied property. But, there has to be a financial reason why the owner cannot pay the rest of what is owed to the bank.
The way you express that is in the hardship letter. Some seminars give you a list of hardships, but do not limit your thinking to a simple list. Anything that causes a change in the financial condition from when the loan was taken out which results in the inability to pay the monthly payments and the impossibility of bringing the rest of the money owed to the closing of the sale is a financial hardship. The obvious are having a business fail, losing a job, medical bills, death in the family, divorce or separation. Less obvious is forced need to move such as having to relocate to get a job or military service when your reserve unit is called up. If your payments adjust on the loan to an impossible level, describe that, but also look for dramatic tax, insurance or other monthly payment increases. One of my easiest discussions to persuade the loss mitigation negotiator that the seller had a financial hardship was when the seller was in jail. Don’t just look at a checklist, look at the curve balls that life throws that cause financial disaster.
The owner should write it personally, with enough detail that the loss mitigation negotiator can feel the pain. The letter needs to describe what has happened to create the financial setback. I have clients where the wife has breast cancer and their insurance does not cover nearly enough of the expenses. Other clients have seen their company go out of business, so being the best salesman of a product that no longer exists will ruin a family financially. Others have watched their restaurant fail completely, shut its doors, and take all their money with it. Do not just say, “we cannot afford to pay you”. You need explain why in vivid detail so that a hardened loss mitigation negotiator who reads these letters all day long can feel sympathetic to your client.
Do not stop with the description of the problem. Explain what you have done to try to eliminate the problem, deal with it, or make it better. The clients with breast cancer have a payment plan for their medical expenses. The salesman has sought work everywhere, but is working at a low hourly wage to put food on the table while he is still looking for a sales job. You do not want the negotiator to just see that your client has fallen down, you want to describe the efforts to get back up again.
At the end of the letter, tell the negotiator that the owner wants to sell the house so that they can pay back as much of the debt as possible. In areas where the market is going down, the owner can emphasize that this is the best way to honor the obligation to repay the bank, because waiting longer or going through foreclosure will yield less and less money for the bank as the value of the house declines.
The hardship letter has to be signed by the seller, and preferably by both sellers.
Do not try to be brief, because brevity leaves out the detail that makes the story poignant. Do not write the letter for your client, as it will sound like a Realtor instead of a person in trouble. Do not let your client lie, as this is a representation made in writing to a bank. Just let your client tell their whole tale of woe.
The hardship letter is not the place to vent all the seller’s frustration with the lender. If there are some things the lender has done that violate the law, you can raise them in negotiating with the lender. The seller is looking for sympathy in the hardship letter and the best way to get no sympathy is to antagonize the loss mitigation negotiator who works for the lender being criticized.
This should be on top of the short sale package, setting the stage for why this owner deserves to be allowed to pay less than what is owed to the bank. It is probably the most important document in the entire package, so give it the attention it deserves.