Problems getting action on short sales aren’t in the news as much as they were a few years ago but they remain a stumbling block to business and efforts to speed up processing are still needed. Fannie Mae is hoping some changes it launched this week will help it continue a process it started earlier this year to make it easier for you to at least get action on your short sale offers.
Under these changes, Fannie is asking you to submit your short sale offer to it at the same time that you submit it to the company that’s servicing the mortgage. By submitting your offer to the two companies simultaneously, you enable Fannie, if it’s the investor on the mortgage, to start taking some of the steps needed to get the application processed. These steps include ordering an appraisal and broker price opinion and reaching out to the servicer to help keep the processing on track. Also, if the servicer needs Fannie to review the application as the investor, Fannie can start doing that without delay.
Beyond these process changes, the company has added pages of information on its website for the listing agent to help remove much of the guesswork from the process. What are acceptable closing costs? What sellers are eligible for a short sale? What steps are needed to get a recommended list price? And so on.
These steps come on top of changes the company rolled out a few months ago that were centered on the company’s online submission and escalation processes. That escalation process was intended to give you a direct line to the company if you weren’t getting answers from the mortgage servicer.
The changes apply to Fannie Mae loans, and that’s a pretty big part of the market, so if they result in quicker processing, they could have a material impact on the short sale market as whole.
To help you learn more about these and Fannie’s previous short-sale changes, Heather Elias, NAR’s director of social business practice, sat down with Jane Severn of Fannie Mae for a 4-minute video interview. You can access that above. Severn is with Fannie Mae’s credit loss management division.
If there was one major takeaway from the National Crime Prevention Council’s 2013 Mortgage Fraud Virtual Conference, it was this: The mortgage market, while no longer a wicked stepchild of the housing crisis, must still be carefully monitored. Though its tantrum-throwing days may be over, the $1.1 trillion government loan industry has the potential to cause serious economic damage should fraudulent mortgage activity persist unchecked.
“What is old is new again,” says Michael Stolworthy, Director of Fraud Prevention for the U.S. Department of Housing and Urban Development. “We’re starting to see some disturbing trends. The same old type of mortgage cases are coming up.”
False statements on loan applications, inflated appraisals, and loan modification schemes are just some of the ways fraud is reappearing in the mortgage market. And with government loans on the rise—the number of mortgages insured by the Federal Housing Administration has nearly doubled since 2006—the potential for mortgage fraud increases, especially among applicants in shaky financial condition.
“Back during the mortgage boom, people who had taken out second and third mortgages were living the champagne lifestyle on a beer budget,” says Robert Simken, a former real estate practitioner turned police officer in Eustis, Fla. “Now, those same people are living in homes that are underwater and willing to do just about anything to get out of their bind.”
Problems arise when that “anything” includes turning to loan counselors, lenders, and alleged real estate professionals who make promises they never plan to keep. “If an opportunity comes along that seems too good to be true and the little hairs on your neck stick up and say ‘danger,’ don’t just ignore them,” Simken warns.
Through public outreach campaigns and educational seminars, organizations like the National Crime Prevention Council stress the importance of using an accredited real estate professional when contemplating any property transaction. “Half the people haven’t checked the qualifications of the individual helping them buy a home,” says Ann Harkins, CEO and President of NCPC.
Simkens agrees that home owners should seek advice from a noted professional. “You don’t go to the butcher for brain surgery and you don’t go to a brain surgeon for chopped meat,” he says. “It’s important to find an expert and not just someone who shows up and can recite the jargon.” Continue reading »
The secondary mortage market company Freddie Mac has updated its bulletin to servicers of Freddie Mac mortgage loans to make clear that they aren’t to pursue a deficiency judgment against a borrower after a short sale or deed-in-lieu of foreclosure if the transaction was processed in accordance with Freddie Mac’s guidelines.
In a deficiency judgment, a lender goes after the borrower to collect the amount of loan that was “shorted” in a short sale or deed-in-lieu of foreclosure, even after the lender approved the short-pay agreement. State laws apply differently to the practice, but in some states a lender can go after a borrower several years after a transaction closes–sometimes to the surprise of the borrower.
The new language, says the company, reinforces “the requirement that the Servicer, for itself and on behalf of Freddie Mac, must waive all rights to seek deficiencies for short payoffs and deed-in-lieu of foreclosure transactions on Freddie Mac Mortgages that have closed in accordance with the Guide.”
You can find the updated language in Freddie Mac Bulletin 2012-5, dated February 15, 2012.
If you have any questions about the language, the company asks you to contact your Freddie Mac representative, if you have one, or call 800/FREDDIE and select “Servicing.”
By Robert Freedman, senior editor, REALTOR® Magazine
The affidavit that Freddie Mac requires servicers to obtain in short sales has been changed at NAR’s request to reduce what was seen as an unreasonable amount of liability risk to practitioners. Freddie Mac requires the affidavit to reduce illegal flipping and collusion between buyers and sellers but NAR members said the language held them liable for situations over which they had no control. (See a past blog post.)
Months ago NAR brought these concerns to the company’s attention, and the result is the revisions to its required language.
The biggest change has to do with what’s known as joint and several liability. In essence, this extends to agents liability for false statements made by others involved in the transaction, even if agents know nothing about the statements. To be sure, agents can fight to get the liability removed, but you can imagine the work and headache that’s required to win that argument.
The company made other changes to its language, and the bottom line is, the liability risk now is much more appropriately aligned to practitioners’ role in the transaction.
NAR has since created a resource page with more information on the change. There’s a link to Freddie Mac’s policy and to a bulletin the company put out on the change. There’s also a copy of NAR’s letter expressing its concerns.
In the video above, NAR Managing Director of Regulatory Policy Jeff Lischer talks about the new language and what to do if you’re in a transaction and the servicer is using the old language.
NAR President Ron Phipps and NAR President-elect Moe Veissi will talk with three Bank of America Home Loans executives on the state of home finance, credit standards, and the latest on short sales in a free, hour-long webinar on Monday, May 9, at 3 p.m., Eastern Time.
Participating BofA executives:
- Matt Vernon, senior vice president of retail sales
- Vijay Lala, senior vice president of product management
- David Sunlin, senior vice president of short sale and real estate management
By Brian Summerfield, Online Editor, REALTOR® Magazine
In an effort to get a better sense of the challenges REALTORS® face in today’s market and explain to members NAR’s positions and actions on key issues, the Leadership Team held its first-ever virtual “Town Hall” meeting yesterday afternoon. The panel — which included NAR 2011 President Ron Phipps, President-Elect Moe Veissi, Vice President and Liaison to Government Affairs Vince Malta, and Vice President and Liaison to Committees Elizabeth Mendenhall — heard questions and comments from members who were videoconferenced in from Northern Virginia and REALTORS® from around the country who called in.
The very first question concerned an issue that’s dogged many members over the past couple of years: the slowness and unpredictability of banks’ decisions and processes, particularly around short sales. As Phipps pointed out, NAR has met with representatives of a few large banks, and will meet with more soon, in an effort to work out a solution to this problem.
According to Phipps, at the root of the issue is a lack of “ironclad policies” that Fannie Mae, Freddie Mac, and the big banks all adhere to. That said, the pace of short sales and other unconventional transactions is starting to pick up, Malta said. Continue reading »
By Melissa Dittmann Tracey, contributing editor, REALTOR® Magazine
Do you ever tell others that you are “showing a foreclosure?” If so, you’re not using the word “foreclosure” correctly.
Some real estate professionals use the term to refer to all distressed properties, Kathy Mehringer, director of risk management with Coldwell Banker Residential Brokerage, Southern California companies, told attendees at a session last week during the California Association of REALTORS® Expo.
Here are the definitions Mehringer provided to set the record straight:
Foreclosure is a legal process by which a defaulting borrower is deprived of their interest in the property.
Real estate owned (or REO), on the other hand, is a real estate asset owned by the lender that is taken back during the foreclosure process.
By Robert Freedman, senior editor, REALTOR® Magazine
You often hear talk within real estate about the shadow inventory that looms over markets. These are the homes that are at risk of going into default or are already owned by the banks and that can come onto the market at any time. They pose a problem because a flood of these properties can put enormous downward pressure on prices as inventories rise far above what can be absorbed by demand. Of course, the properties tend to sell for quite a bit less than other properties, and that’s good for buyers, particularly investors who can scoop up properties in bulk. But the discount inventory isn’t friendly to sellers whose properties have to compete with them.
All this notwithstanding, there really isn’t a hard and fast rule of what properties actually comprise the shadow inventory. This lack of definition is important, because one analyst who reports a big, scary number in the news might be thinking something very different than another analyst who uses very different assumptions. So, whether 7 million properties are looming over markets or something closer to 2.5 million is an important distinction.
By Robert Freedman, Senior Editor, REALTOR® Magazine
It’ll be interesting to see what happens on Monday. That’s the day lenders who participate in the federal government’s mortgage modification program are required to participate in its standardized short-sale procedures. All of the big lenders participate in the modification program, so all of them are committed to participating in the short-sale program, too. So, the main universe of lenders will be following the new procedures.
Of course, Fannie Mae and Freddie Mac haven’t come out with their own guidelines yet, although they’ve said they will be doing so soon and that their guidelines will be based on the government’s program (hard for them not to be, since the companies are under government conservatorship now). So, once those guidelines are out, most mortgages will be eligible for processing under the federal short-sale procedures.
In reality, little will change right away. The short-sale guidelines put timelines in place (when to respond to a short-sale application, for instance), but lenders are unlikely to meet them because the deadlines aren’t realistic now. It’s more appropriate to look at the timelines as aspirational goals. So, it’s probably safe to say that although the days of six-month waits to hear back from lenders on short-sale applications are over, neither will those applications get processed in 10 days.
Continue reading »
By Robert Freedman, senior editor, REALTOR® Magazine
Congress helped keep home sales on solid ground when it extended and expanded the home buyer tax credit late last year. Given the federal budget deficit, you also have to say it acted reasonably by limiting the tax credit to just six months. (Deals in process by the end of April have until the end of June to close.)
The question markets now face, though, is whether short sales are going to limit the effectiveness of the credit.
When you consider that short sales comprise a significant share of markets today and can take months to close, you have to wonder if these transactions are going to pose a problem as the tax credit deadline nears.
One real estate professional I talked to in California says her market consists almost entirely of distressed sales. Many of these are REOs, which can sell fast, especially when the deal involves investors looking for bargains.
But short sales, despite signs of progress, remain another matter. According to practitioners and others I’ve spoken to, lenders are improving their short-sale processing and more improvements could be in the works as federal guidelines take effect in early April. (More about that.) But the transactions still take a long time. It’s not unusual for buyers, hoping to take advantage of the tax credit, to feel stymied by the uncertainties and delays of short-sale purchases.
To help you explore solutions for the issues at the root of delays, we brought together a real etate professional and a nationally recognized short-sale consultant, Scott Thompson of ServiceLink and Mortgage Resolution Services, for a free webinar on March 25. They won’t have all the answers, of course, but between the two of them they’ve seen enough deals to know of the main sticking points and they’ll have ideas on how to work through them.
The webinar is on Thursday, March 25, at 3 p.m., Eastern Time. To register, click here, and scroll down to the bottom of the page.