Short Sales – Updated 3/01/2010
The new Short Sale Process will be crucially important in 2010. We believe that having timely information on this issue is vital to our community. Scroll down to find the latest updates and information on the new Short Sale process.
The Treasury department has released new rules to help simplify the ’short sale’ process. For months, we have been preparing our followers for this great announcement. It should mean we will have less foreclosures in 2010. The sellers will be able to leave the property with dignity and on a timetable. Our neighborhoods will have less vacant houses. The negative impact on real estate values will not be as severe.
As of now, these seem to be the key points:
- Mortgage servicers have 10 days to accept or deny a short sale request. After a sale is completed, the borrower could be completely released from debt.
- Borrowers are eligible to receive a $1,500 moving allowance, if they sell their home through a short sale.
- Mortgage servicers will receive $1,000 for each completed short sale.
- Investors who hold first mortgages can get as much as $1,000 for allowing second lienholders to release their liens.
- Second lienholders can get only as much as $3,000 in proceeds from short sale to release their liens.
- The property must be the homeowner’s principal residence.
- The homeowner is delinquent on the mortgage or default looks likely.
- The loan was made before Jan. 1 this year and is less than $729,750
- The borrowers’ total monthly mortgage payment exceeds 31 percent of their before-tax income.
If you want to read Supplemental Directive 90-90, download it here.
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Update 03/01/10
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
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Update 02/23/10
2/23 – Short Sales Surge (short sales)
Here is a graph from Calculated Risk:
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Update 02/13/10
HAFA Helping Homeowners: A Guide to Short Sales
Today’s post is dedicated to helping families find an alternative to foreclosure, and helping them return to the goal of homeownership more quickly; therefore, we are emphasizing the brochure developed by the National Association of Realtors (NAR) that nicely summarizes the existing HAFA Program.
On November 30, 2009, the Obama Administration released guidelines and uniform procedures for its Home Affordable Foreclosure Alternatives Program (HAFA). Modified HAFA rules for loans owned or guaranteed by Fannie Mae or Freddie Mac will be issued in coming weeks. HAFA does not apply to FHA or VA loans.
About HAFA
HAFA, which will help homeowners who are unable to retain their home under the Home Affordable Modification Program (HAMP), provides incentives in connection with short sales and deeds-in-lieu of foreclosure.
The program:
Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
Uses borrower financial and hardship information already collected under HAMP.
Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6%).
Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed).
Uses a standard process, uniform documents, and timeframes/deadlines.
Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to a $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders.
Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.
Does not take effect until April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program sunsets on December 31, 2012.
TIMELINE
Notification
If a servicer has not already discussed a short sale or DIL with the borrower, it must notify the borrower in writing of these options and give the borrower 14 calendar days to respond, orally or in writing. If the borrower does not respond, that ends the servicer’s duty to give a HAFA offer.
Servicers must consider HAMP-eligible borrowers for HAFA within 30 days after the borrower does at least one of the following:
Does not qualify for a HAMP trial period plan
Does not successfully complete a HAMP trial period plan
Is delinquent on a HAMP modification (misses at least 2 consecutive payments)
Requests a short sale or DIL
Short Sale Agreement
The borrower has
14 calendar days from the date of the Short Sale Agreement (SSA) to sign and return it to the servicer. The SSA must give the borrower an initial period of 120 days to sell the house (extensions permitted up to a total of 12 months).
Purchase Offer
Within 3 business days
a copy of the sale contract and all addenda
buyer documentation of funds or pre-approval/commitment letter from a lender
all information on the status of subordinate liens and/or negotiations with subordinate lien holders.
of receiving an executed purchase offer, the borrower (or agent) must submit a completed Request for Approval of Short Sale (RASS) to the servicer, including
Within 10 business days
after the servicer receives the RASS and all required attachments, the servicer must approve or deny the request and advise the borrower.
Closing
The servicer may require the closing to take place within a reasonable period after it approves the RASS, but not sooner than 45 days from the date of the sales contract unless the borrower agrees.
The servicer must release its first mortgage lien within 10 business days (or earlier if required by state or local law) after receipt of sales proceed from a short sale or delivery of the deed in the case of a DIL. Investor must waive rights to seek deficiency judgments and may not require a promissory note for any deficiency.
FAQs
Who is eligible for HAFA?
The borrower must meet the basic eligibility criteria for HAMP:
Principal residence
First lien originated before 2009
Mortgage delinquent or default is reasonably foreseeable
Unpaid principal balance no more than $729,750 (higher limits for two- to four-unit dwellings)
Borrower’s total monthly payment exceeds 31% of gross income
How is the program being implemented?
Supplemental Directive 09-09 (November 30, 2009) gives servicers guidance for carrying out the program. A short sale agreement (SSA) will be sent by the servicer to the borrower after determining the borrower is interested in a short sale and the property qualifies. It informs the borrower how the program works and the conditions that apply.
After the borrower contracts to sell the property, the borrower submits a “request for approval of short sale” (RASS) to the servicer within 3 business days for approval. If the borrower already has an executed sales contract and asks the servicer to approve it before an SSA is executed, the Alternative RASS is used instead. The servicer must still consider the borrower for a loan modification.
What are the steps for evaluating a loan to see if it is a candidate for HAFA?
1. Borrower solicitation and response
2. Assess expected recovery through foreclosure and disposition compared to a HAFA short sale or deed in lieu of foreclosure (DIL)
3. Use of borrower financial information from HAMP
4. Property valuation
5. Review of title
6. Borrower notice if short sale or DIL not available (to borrowers that have expressed interest in HAFA).
What are the HAFA rules regarding real estate commissions?
The guidance states that a servicer may not require a reduction in the real estate commission below the amount stated in the SSA, up to 6%. However, if the servicer has retained a vendor to assist the listing broker, the vendor must be paid a specified amount from the commission.
What else should I know?
The deal must be “arms length.” Borrowers can’t list the property or sell it to a relative or anyone else with whom they have a close personal or business relationship.
The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, forgiven debt will not be taxed if the amount does not exceed the debt that was used for acquisition, construction, or rehabilitation of a principal residence. Check with a tax advisor.
The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment, which may hurt credit scores.
Buyers may not reconvey the property for 90 days.
Here is a printable copy of NAR’s HAFA Brochure and NAR’s Text-Only version of the Brochure. If you’d like more information on HAFA and more detailed FAQs, visit www.realtor.org/shortsales.
And if you’d like more information about short sales, you can visit our “Short Sales” tab above on the KCM Blog.
-The KCM Crew
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Update 02/06/10
New HAFA brochure from NAR
Text only version of the brochure
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Update 02/04/10
Don’t Be Short-Sighted on Short Sales
There was an interesting article that was posted on The KCM Crew fan page the other day titled: Surge in Short Sale Requests Unlikely to Impact Housing Market. In this article, it was reported:
In the first half of 2009, only 40,000 short sales were completed, according to the most recent data available from the Office of the Comptroller of Currency shows.In addition, (the study) said only an estimated 8 to 12 percent of all homeowners who request short sales accomplish a completed transaction.
Though both of those points were true for 2009, they are based on past results. As we have previously posted, the short sale process will change radically as we proceed into 2010. The change will create a surge in short sales.
Let me give you the evidence from which I draw that conclusion:
1.) Short Sales are already increasing rapidly
Though, according to the Office of the Comptroller of Currency, there were only 35,428 short sales completed in the first half of 2009, there were 30,766 completed in the third quarter alone which represents a 22.4% increase over the previous quarter. The fourth quarter numbers are not yet in, but they will show another major increase.
2.) The government has determined that short sales are the answer.
The administration announced new short sales guidelines (HAFA) that will go into effect on April 5, 2010. These guidelines address the major challenges to the process which negatively impacted close ratios.The Inspector General of TARP, in his most recent report to Congress, said:
HAFA creates financial incentives for borrowers, servicers, and investors to avoid a foreclosure by utilizing a short sale or a deed-in-lieu of foreclosure. According to Treasury, these options generally provide borrowers, investors, and communities with a better outcome than a typical foreclosure sale.
In an article in Housing Wire this week, it was reported that Seth Wheeler, senior adviser to the US Treasury Department, while at the American Securitization Forum 2010 conference in Washington DC, said the focus of the Administration is shifting somewhat away from modifications:
“Short sales, deeds in lieu are other ways to prevent foreclosures to help achieve [housing] stability,” he said. “Modifications are only for a certain subset of distressed homeowners.”
3.) Banks are realizing that they lose less money on a short sale than they do on a foreclosure.
In an article in the Las Vegas Sun titled: Short Sales Soar while Foreclosure Sales Slacken it was reported:
In Las Vegas, banks make $80 per square foot on foreclosures but $130 per square foot on average in short sales, said Steve Bottfeld, executive vice president of Marketing Solutions.“I think the bottom line is that short sales ultimately replace foreclosures because of the financial impact on the financial institutions,” Bottfeld said. “The banks are going to look at it differently and opt for more short sales.”
From the same article:
Dennis Smith, president of Home Builders Research, said short sales will be the “story of the year” because of the effect they will have on the housing market.“It should cause prices to increase a little,” Smith said. “We have seen prices flatten the last five to seven months, and one reason is because we haven’t been flooded with all these foreclosures. They are doing more short sales.”
4.) Companies are gearing up for the surge in short sales.
Wilshire Credit Corp., the mortgage servicer bought by IBM in October, is getting set to receive a substantial servicing portfolio (short sale possibilities) from the mortgage giant Fannie Mae according to industry sources. In the article announcing this, Housing Wire said:
Any mortgage servicing put with Big Blue and Wilshire Credit, however, would not include management of bank-owned properties within the portfolio. REO Insider, a sister publication, broke the news Wednesday morning that Wilshire Credit would shed its REO operations by March 1 — seemingly to gear up for the weight of the Fannie portfolio.
Even the banks are getting ready. According to an article in DS News:
Major banks are preparing for an influx of short sales. Many claim to have hired extra staff to handle short sales, and some have purchased new software to assist in the process. JP Morgan, with one of the highest default rates in the industry, says it has hired 5,000 new employees to handle distressed sales.Bank of America services about 14 million mortgages, including millions of troubled loans it acquired in the purchase of failed Countrywide Home Loans. The lender says it has also taken steps to prepare for an increase in short sales by upgrading its system to handle these types of transactions.
For these four reasons, I believe short sales will have a major impact on the housing sector in 2010.
If you are a homeowner who finds themselves underwater on their mortgage, it is a much better alternative to foreclosure.
If you are a buyer (and you have some patience), you have a fabulous opportunity.
If you are in real estate or mortgaging, educate yourself to the process so you can help as many families as possible.
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Update 01/30/10
Articles:
Further proof that companies are preparing for a rash of ‘short sales’
Banks are revving up for more ‘short sales’. Will it matter?
Yet more proof they are getting ready for a rash of Short Sales?
Are the pieces of the puzzle for Short Sale reform being put together?
New Short Sale Process Puzzle Coming Together
The Treasury Department has announced new guidelines to ensure ‘short sales’ will be more readily initiated. The program starts April 5, 2010; but servicers have the option of starting sooner. The administration is taking steps to prepare for the increase in short sales that the new guidelines will create in 2010.
A short sale is a workout program that allows a borrower to sell the property, even if the proceeds are less than the loan payoff, due to low property value. If approved, a Short Sale option can help a borrower avoid further collection activity or foreclosure action.
For homeowners, a short sale provides a more dignified transition than a foreclosure as they can time the closing of the sale to coincide with their relocation instead of being evicted by the sheriff.
It will also allow them to return to homeownership sooner. Fannie Mae, for instance, requires at least a five-year wait after a foreclosure but only two years after a short sale.
Short sales are also better for the neighborhood. The home stays occupied instead of becoming a vacant foreclosure that may attract crime.
Plus, a bank loses about 50% on a foreclosed house while only losing 30% on a ‘short sale’. This means that values of surrounding homes won’t be affected as dramatically as they would in the case of a foreclosure.
You may be asking: “Then why haven’t more ‘short sales’ been done?”
That is a great question. It seems that the service companies making the decision as to whether a home should go to foreclosure or be sold as a ‘short sale’ were receiving higher fees if they foreclosed on the house.
The National Consumer Law Center revealed this in a recent report. The report stated:
The servicer’s only incentive to favor the short sale is payments by the investor for performing a short sale….Only if those payments are larger…will the servicer’s scales tilt towards a short sale.
The report broke down the fees involved. Here is a table showing the impact on fees (positive or negative) based on the action the servicing company took:
But the good news is that this situation is being corrected. Servicing agencies will now be more positively rewarded to complete short sales. And it seems the administration is going to separate servicing companies to avoid conflicts of interest. Housing Wire, on January 21, reported:
The GSEs have been quietly looking to revamp their servicing models in the wake of a historic collapse in the nation’s housing markets. The prevailing theory is that agency servicers would either be categorized as performing or non-performing loan servicers, but not both — a drastic change from current servicing models, where the same servicer often manages both performing and non-performing loans.
According to sources, so-called ‘performing servicers’ would continue to get paid via a traditional servicing strip arrangement.‘Non-performing servicers’ would receive a smaller servicing fee, but would be eligible to receive more substantial cash incentives each time a delinquent loan reperforms, or if other loss mitigation efforts (such as a short sale or deed-in-lieu) succeed.
And it seems these changes are beginning to take place. Wilshire Credit Corp., the mortgage servicer bought by IBM in October, is getting set to receive a substantial servicing portfolio from the mortgage giant Fannie Mae according to industry sources. In the article announcing this, Housing Wire said:
Any mortgage servicing put with Big Blue and Wilshire Credit, however, would not include management of bank-owned properties within the portfolio. REO Insider, a sister publication, broke the news Wednesday morning that Wilshire Credit would shed its REO operations by March 1 — seemingly to gear up for the weight of the Fannie portfolio.
The new short sale process will be crucial to housing in 2010. It is encouraging to see that the plan is coming together.
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Update 12/31/09
Interesting article on how short sales will increase in 2010.
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Update 12/22/09
From Housing Wire:
The Department of Housing and Urban Development (HUD) released a letter to lenders regarding borrower eligibility for a new Federal Housing Administration (FHA) mortgage after pursuing a short sale.
According to the letter and effective immediately, borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement “to take advantage of declining market conditions” or to purchase another property at a reduced price.
Borrowers are cleared for a new FHA-insured mortgage if they were current on their previous mortgage and other debts at the time of the short sale and if the proceeds from the short sale serve as payment in full.
If a borrower executes a short sale while in default on their mortgage would not be eligible for a FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Some lenders can make exceptions if the default was due to circumstances beyond the borrower’s control such as the death of the primary wage earner.
You can download the letter here.
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Update 12/17/09
Frequently Asked Questions about short sales
1) What exactly is a SHORT SALE?
A short sale is when a property is sold for less than the sum of all liens on the property. The lender often agrees to forgive the unpaid amount and releasing the borrow from any remaining obligations.
2) What conditions must exist for a lender/service company to consider a short sale?
The borrower must be able to demonstrate the inability to pay their mortgage and currently experience a hardship. Many servicing companies and lenders will require that the borrower first attempt to do a loan modification before they will allow a short sale.
3) What is a loan servicing company and what do they do?
Servicing is the process by which a mortgage bank or subservicing firm collects the timely payment of interest and principal from borrowers. The level of service varies depending on the type of loan and the terms negotiated between the firm and the investor seeking their services. Their duties generally include collecting mortgage payments and crediting those payments as well sending out payment reminders establishing escrow accounts and making payments to taxes and hazard insurance companies. They are responsible for all these activities as well as loss mitigation when a loan begins to default. It is the servicer’s responsibility to report all activity back to the investor.
4) How can an agent be sure they will get paid or will not have the fee substantially reduced?
Real estate commissions get paid from the proceeds of the sale. The Treasury department guidelines have set up rules to protect real estate fees in order to attract the highest quality of professional. The guidelines allow for fees up to 6%. Negotiation of fee (not in excess of 6%) is not allowed as a condition for the servicing company to accept the offer.
5) When do the new treasury guidelines take affect?
April 5, 2010; but servicers have the option of starting sooner. The program is scheduled to continue until 2012, but only applications received on or before December 31, 2012 will be considered.
6) Why do short sales take so long to complete?
As per the new Treasury department guidelines, once a completed proposal has been received by the servicer they have TEN days to reject or accept the offer. Closing will take place no sooner than 45 days of submission unless agreed to by the buyer.
Some of the reasons why short sales take so long seem to get addressed in the guidelines by way of servicers having to respond in 10 days. The servicers also receive $1,000 incentive for a timely completed transaction.
Other reasons for short sales taking so long has to do with incomplete submission of short sale proposals and failure to adhere to servicers request for documents in a timely manner.
7) What are considered acceptable hardships by the servicers/lenders?
Hardships generally fall into 5 categories. Let’s call them the 5 D’s:
- Death –of a borrower
- Dying-Sickness of a borrower affecting their ability to earn and pay their debt
- Destitute-an involuntary loss of income
- Divorce- in this case, when one of the occupants leave and it affects the income of the house it can be deemed an acceptable hardship.
- Disasters – in the case of natural disasters
8) What if a homeowner is current on their mortgage?
It is not necessary for a borrower to be late on their mortgage in order to engage in a short sale. What is important is being able to demonstrate the inability to pay the monthly mortgage debt. Even if the payment is being made now but documentation proves a foreseeable default, this is acceptable.
9) What will happen to the credit score of a borrower who completes a short sale?
The effects on credit will vary depending on payment history and the payments of other debts. Assuming the borrower is current on their mortgage upon completion of a short sale, they may only see a 50 point reduction in your credit score. Foreclosure on the other hand can lower your score by 200 points or more (NAR).
10) How will the short sale show up on a credit report?
It can show up in several different ways but generally speaking it will say something along the lines of: “Paid in full; settled for less than originally owed.”
11) If a borrower wants to do a short sale, can the property be sold to a family member?
No! It is a requirement of the short sale agreement that the sale is an arms length transaction. This means in no way can the seller and buyer be related in family or business. The buyer will also be required to include language in the sales contract that they will not sell the property for at least 90 days and a statement affirming the arms length transaction.
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Update 12/16/09
The New Face of Short Sales
By Phil Tesoriero
Many changes have arrived in the processing of short sales. Recently the Treasury department published new short sale guidelines which they refer to as the Home Affordable Foreclosure Alternatives, or HAFA. It is important to discuss the process, manage expectations and consider all outcomes. The goal of course, is to prepare and submit an offer that will be approved so you can resolve your financial challenges related to your home.
The first thing you need to consider is what conditions need to exist to engage in a short sale. By definition a short sale is when the unpaid balance of liens[1.1] against your property exceeds the market value. This is also referred to as being “upside down” or “underwater” . You will also need to demonstrate the inability to make your monthly mortgage payment, and prove a significant level of hardship. Acceptable hardships are generally broken down into 5 categories:
- Death
- Illness
- Divorce
- Involuntary loss of employment/income
- Natural disaster
That is the “old” definition; and it still holds true. However, there is more to it now than ever before. Lenders and servicers who are now processing short sales are in agreement with the new Treasury guidelines, which are scheduled to begin on April 5, 2010. These guidelines require that a loan modification was attempted unsuccessfully, or you did not qualify under the HAMP[1.2] modification standards. If these conditions are not met, there is a good chance you will not qualify under the HAFA program
Contrary to popular belief, it is not necessary to be late on your mortgage as long as a default is reasonably foreseeable. It is also important for you to establish the following as well:
1) Did you get this loan prior to January 1, 2009?
2) Is it a first lien?
3) Is the current balance on the loan less than $729,750?
It is important to speak to your servicing company in order to determine if they will approve the short sale. The good news is once this is done, they have 30 days to note your file with the outcome of the request.
[1.1] The right to take another’s property if an obligation is not discharged
[1.2] For more information on Home Affordable Modification Program (HAMP) https://www.hmpadmin.com/portal/index.html
Part of the servicer’s due diligence will be to determine “expected recovery through foreclosure and disposition.” If they can determine that they will experience greater recovery of funds via a foreclosure, as opposed to your offered short sale price, they often will reject the short sale. Preparing a carry cost analysis to project the costs associated with the foreclosure and the carry cost of the loan will be helpful in projecting a more positive outcome. The analysis should include items such as unpaid principle, interest, taxes, insurance, etc. in the projected time frame for the foreclosure sale to close.
Your servicing company will try to determine the value of the property often through a broker’s price opinion (BPO). By performing your own BPO, you are not substituting the servicing company’s BPO, but are helping to build a case for a short sale as well as influence the servicing company’s decision. A BPO is a summary of the property and a comparison of it to three sold properties and three listings. The sales and listings, known as comparables, should be geographically close and similar to your property. Comparable sales must be recent (usually within three months or less) and listings should still currently be on the market. A well prepared BPO can have a significant impact on the lender’s final decision.
With all this done it is important that an income and expense statement is prepared for the servicing company. This statement helps establish your income limitations and inability to pay your current debt. Attaching recent paystubs along with banking statements and copies of tax returns will also be very helpful and often required.
The servicer has also required you make available to them a preliminary title report to establish any other liens that will affect your ability to transfer title. Contacting a title company and requesting them to prepare this report for you to submit to the lender will be required and is an important part of the completed package.
You should review the short sale agreement, which the servicer will provide to you. It describes and discloses the roles of all parties involved in the transaction. You do have the alternative of going to contract and applying for an “alternative short sale approval”[3.1]. The standard agreement lists the following:
- Property must be listed with a licensed real estate professional familiar with and doing business in the area.
- Listing period of no less than 120 days and up to 12 months.
- You must give authorization for the servicer to communicate with other parties (mainly the above mentioned real estate agent)
- The listing must contain language that the transaction is subject to approval by the servicer or other 3rd parties.
- The servicer will pre-approve a list price, in the case of the contract being submitted they will approve the proceeds.
- The listing must state the amount of the sales commission, NOT TO EXCEED 6%.
- Must be an arms-length transaction[3.2] such language is needed in the contract.
- The buyer must agree not to sell within 90 days of the closing.
- You will be released from all future debt of the lien.
- You will receive up to $1500 for relocation.
- You must consult your tax professional, as there are tax considerations involved with this transaction. You will receive a 1099C.
As long as you comply with these guidelines, the servicer will agree NOT to complete a foreclosure sale. That being said, it is important to understand that there are times the servicer can revoke the short sale agreement:
- If there is any evidence of fraud
- If a bankruptcy is filed
- If there is a significant decline in the condition of the property
- In the event your financial condition improves.
Under the terms of the agreement you may be required to pay 31% of your current income as a modified mortgage payment towards your mortgage during the agreement period. Your listing agent must also work in good faith and do everything they can to market, sell and close the transaction to be in compliance with the servicer’s agreement.
Once a buyer is procured and you have in hand a fully executed contract, these contracts must be submitted within three days to the servicer. This documentation along with proof of funds for the buyer and the title information previously discussed. Here is the GREAT NEWS: Within 10 days, the servicer is required to reply with a decision to approve or decline. The notice will be mailed to the property so it is important you look for it and discuss it with your listing agent as soon as it is received. If the offer is approved by the servicer they will set a closing date no less than 45 days from the contract date, unless otherwise agreed by the buyer.
The best way for you to proceed with getting your distressed situation resolved is to work together with your listing agent. It is sometimes hard to stay motivated in this type of transaction, but working together and submitting a superior proposal to the servicing company you should see positive results and a quicker resolution to the situation.
[3.1] If contracts are executed prior to submitting a Short sale agreement, will need to submit an alternative request form, as per the Treasury guidelines.
[3.2] Parties of the sale must be unrelated. Both parties will be required to sign affidavit stating they are unrelated.
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Update 12/07/09
Bloomberg News article:
“Banks are beginning to go along with short sales in increasing numbers, three years into a U.S. housing slump that pushed the economy into a recession and cut resale values by 30 percent from the peak in July 2006. Short sales almost tripled to 40,000 in the first six months of 2009 from the same period a year earlier.
“It’s really finally dawning on banks that they’re better off with a short sale,” said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. “I think banks were in denial.”
JPMorgan doubled the number of staff trained to handle short sales after adding 5,000 people since Jan. 1 to deal with distressed mortgages, said Thomas Kelly, a spokesman for the New York-based bank’s home lending division.
Bank of America, the nation’s largest loan servicer, …started a “cooperative short sales” program in October and may close its first short sale through the program this month, said Dave Sunlin, senior vice president for foreclosure and real estate management.
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Update 12/05/09
IRS on Home Buyer’s Tax Credit
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Previous Updates
Re/Max Chairman Dave Liniger said it best:
“Until now, the short sale process has been cumbersome for all involved, and took upwards of eight to 10 months for a transaction to close. … But with new guidelines issued Monday, short sale transactions will increase dramatically, which means less vacant and vandalized properties in neighborhoods across the country.”
From Marty Stone, Senior VP of Industry Relations, Corporate Counsel, Prommis:
“In the housing market today, short sales are becoming more commonplace as servicers are more inclined to work with homeowners to avoid the high costs of foreclosure. It is also well accepted in the industry that the costs and/or losses incurred by the servicer if the property reverts back to them in REO are usually greater than any reduction in payoff they may incur in a short sale. The latter remains an arms length transaction between a motivated seller and buyer and also allows the borrower to avoid foreclosure while preserving the dignity of the homeowner.
While short sales are becoming more and more prevalent, many homebuyers or Realtors may be wary of them. Unlike a traditional residential closing where lien holders receive full payoff, there is a negotiation component to short sales that may delay the process. The valuation process may return conflicting information that must be verified. However, as servicers and their partners become more familiar with the process these sorts of delays should be reduced.
In 2010, short sales will become an important option for borrowers with financial difficulties. Of course as with any real estate transaction, borrowers facing these challenges should carefully research all possible options available to them to ensure the best possible outcome.”
Articles on the subject:
Blog posts on the subject:
