Many homeowners do not want to short sale their properties but unfortunately are being forced to.
Many homeowners do not want to short sale their properties but unfortunately are being forced to.In a recent TBWS Daily Show Frank Garay pointed out an individual named Jarred who worked for Chase Servicing was told by his boss that servicing companies are “not in the modification business, they are in the foreclosure business”. An answer often suspected but never actually acknowledged within the industry.
For whatever reason, with the subsidies offered by the Federal government it is more advantageous for the big four lenders, Chase, Citicorp, Bank of America and Wells Fargo to foreclose or force a short sale than it is to modify a loan. As a result, my experience has been that it is extremely difficult to modify a residential loan.
One Exception…Commercial Loans. Ironically, commercial loans do not have similar government backing and as a result many of these lenders take a more pragmatic approach. They see the value of loan work outs and modifications as there are no similar incentives if they foreclose.
Emerging Trend… More and more frequently first lenders are now releasing borrowers from any deficiency at the time of short sale approval. Our short sale department used to have to fight for this luxury, however, over the past six months the “Big Four Banks” mentioned above, together with others, are including release language in their approval letters without even having to negotiate it. I can only suspect these lenders are being reimbursed for the short fall.
While the first lien holders are becoming increasingly more cooperative to deal with in approving short sales (provided the price can be reasonably supported by BPO’s), second lien holders apparently receive no assistance from the Federal government. As a result, second lien holders have become increasing difficult to work with demanding commissions and closing fees be reduced as a condition of approval to allow them more money at closing.
Perhaps more important, second lien holders have been extremely difficult and uncooperative to deal with when seeking a release of deficiency. Beware, every attempt should be made to negotiate and strike the best deal with these second lien holders. A growing number of clients have recently contacted me (the vast majority of which closed their short sale through other offices) are now being sued for the deficiency. Note to self – First lenders are now pleasant to deal with while second lenders are worse than mosquitoes after running your boat aground in the mangroves at dusk in the summer.
Speaking of summer, this summer Bank of America rolled out a new program where a short sale seller can substitute a new buyer for one that walked without restarting the entire the process. This means sellers will no longer have to initiate a new short sale; instead our office can continue with the original transaction in Equator and still work with same short sale negotiator.
When a backup offer is ready we can send a message via Equator that the original buyer is no longer interested in the property. The negotiator will then respond within two business days and ask if a backup offer is ready to submit. If the seller has another buyer prepared to make an offer, the short sale can proceed without having to repeat the short sale initiation steps. The short sale status in Equator will change to “Marketing” and provide 14 days to complete various tasks. If the tasks are not completed and the new offer is not uploaded within 14 business days, the file will be closed. This new process applies only if there’s an available backup offer when a buyer walks. If the Seller does not have a backup offer ready to be submitted, the short sale file will be closed.
Short sales are ever changing and are filled with obstacles. Finding one’s way through the process can be a real challenge. You really need a trusted experienced office to help navigate this difficult terrain. Having been involved and obtaining approval in well over 500 short sales, we know the answers sellers are looking for. The key is to be fully informed throughout the process. No one should lose sleep over short sales. Our job is to turn night owls into sound sleepers with peace of mind that someone experienced is watching over their file.