Short Sale Commander Blog

From FoxBusiness.com

By: Donna Fuscaldo

Source: REALTOR Magazine

By Stacey Moncrieff, Kristin Kloberdanz

Take a hardship sale, apply knowledge and chutzpah, and get ready for some of the most rewarding closings ever.

“There’s nothing better than being able to give a seller a new chapter in life,” says Chris Willette, a salesperson with Edina Realty in Edina, Minn., talking about the three years he has spent honing his short-sales expertise. “The recommendation letters I have from people . . . you can’t explain the gratitude people feel.”

Whether short sales are a small segment of your business or critical to your survival, you need to know how the process is evolving so that you can beat the high failure rate that continues to plague short-sale offers.

“Lenders have hired more staff, developed more structured escalation policies, and in a few notable cases adopted technology platforms, all intended to improve the quality of their work on short-sale files,” says default-industry consultant Scott Thompson of Sacramento, Calif. “Nevertheless, approval timelines are sometimes so long that it’s difficult to hold a transaction together.”

To the sellers and buyers you serve, being able to masterfully close short sales will make you a hero, a genius, and a saint all rolled into one—a hero for the fearless persistence you show when you hear no (or nothing) from the lender; a genius for being able to understand and explain the changing short-sale guidelines; and a saint for being willing to proceed against the odds, knowing that you won’t be paid unless the transaction closes.

San Francisco resident Michael Colo found himself on the brink of foreclosure a few years ago after the value of his luxury condo plummeted. He talked with four salespeople before finding Dennis Serrao, broker-owner of Serrao Realty in Livermore, Calif. “Dennis took the time to explain the whole process,” says Colo. “He was the only one who said the sale might not go through. He was very up-front about expectations.”

Three months later, Colo had sold his condo in a short sale. “I avoided foreclosure, and my credit looks great,” he says. He has since bought another home.

Thomas Lamosse of Edina, Minn., was on the other side of a short sale. Lamosse lives in the United States just six months of each year. For several years, he rented from a friend. “I wanted to get out of my friend’s basement,” he says. Another salesperson offered nothing but discouragement. “She kept saying, ‘Don’t buy a short sale. You have to negotiate with the bank, it’s a long wait, and you won’t get it because 30 percent of them don’t go through,’ ” recalls Lamosse. When he found a short sale listed by Willette, he discharged the other salesperson. The prospect of dual agency didn’t alarm him: “I’m a shrewd businessman, and it was a cash offer.”

Three times, Lamosse threatened to pull the plug rather than bring more money to the transaction. As a result, “I found out the bottom-of-the-barrel price the bank would take,” Lamosse says.

But that price was still higher than he was willing to pay, so Willette convinced the seller to put $3,000 into the deal. “It was an emotional roller coaster, but Chris was pretty amazing because he got the seller to kick money into the pot, he got the bank to drop its price, and he got me to raise my maximum amount,” he says. “The other salesperson couldn’t have come close to this.”

Lamosse moved into his condo in September.

One Destination, Many Roads

When you embark on a short sale, the biggest obstacle you’ll face is the lack of a clear, consistent, dependable path. “In Forrest Gump vernacular, short sales are like a box of chocolates,” says Thompson. Apart from the basics—submitting a hardship package and waiting for the bank’s answer—“you have to approach each sale individually and, at the same time, stay on top of a constantly changing landscape,” he says.

That starts with an understanding of the federal guidelines that have been created for loan servicers, the entities that collect mortgage payments from home owners and attempt to work out distressed loans through modifications, short sales, deeds-in-lieu of foreclosure, or, if all else fails, foreclosure.

Borrowers who fall within federal guidelines may be able to accomplish a short sale using the Home Affordable Foreclosure Alternatives program (see “How HAFA Has Helped”). But the HAFA guidelines vary depending on whether the loan is held by Fannie Mae, Freddie Mac, or a private entity, so it’s important to know who owns the loan. Even if they don’t qualify for HAFA, borrowers may still be able to do a short sale—but factors such as the documents required in the hardship package, qualifying criteria, and speed at which a negotiator is assigned will vary. Learning the variations takes time.

After a sale, “I always ask the processor or negotiator, ‘Is there anything I could have done differently?’ ” Willette says. In this way, he gets to know each bank’s particular hang-ups, such as wanting every page of the short-sale package numbered.

Willette brings empathy to his work. A 16-year veteran of the business, he got his start in short sales three years ago when he needed to sell his own home at a loss. The runaround and lost paperwork were considerable, he says, but he got the bank to accept a $200,000 loss. The process has gotten only slightly easier, he says.

“There are still too many lost faxes and inexplicable valuation problems,” Thompson agrees. “There’s also too much ad hoc policymaking by inexperienced lender representatives—and too much waiting on hold.”

Willette avoids faxing altogether. “I use certified mail,” he says. “If a document is lost, I can say, ‘You received it at 10:38 a.m.,’ and then it’s mysteriously found. Even if it costs me $20, my time is important.”

Who Are Component Servicers?

Traditionally, mortgage loans have been serviced by lending institutions. But more and more, servicing is splitting off as a distinct function that may or may not be administered by a lender—particularly for loans in distress.

Lenders both big and small are looking at the option of moving delinquent mortgage volume to component, or specialty, servicers. In nearly all cases, the component servicer takes on only the default servicing functions on the mortgages. These specialty servicers are paid for achieving pre-foreclosure resolution. Meaning: Your sellers’ interests and those of the component servicer are aligned. On short sales that have been assigned to a component servicer, you have the benefit of working with someone whose sole focus is on resolving the delinquent mortgage—as quickly as possible.

“Once we confirm the transaction is consistent with program guidelines and serves the interests of the mortgage investor, we want to get the transaction completed as quickly as possible,” says Leo Esposito, first vice president of Loss Mitigation & Asset Disposition at Pittsburgh-based ServiceLink, one of the largest component servicers in the market. “Transaction velocity is important.”

To curb problems, many servicers are turning to technology platforms that allow you and the servicer to collaborate throughout the short-sale process. The biggest, Equator, was first released as REOTrans in 2003 by the company’s Chairman Mark McKinley and CEO Chris Saitta; the platform was expanded about two years ago to handle short sales. It’s used by several major servicers, including Bank of America and Wells Fargo. In general, platforms such as Equator have been lauded for bringing more accountability to the process. But for some practitioners, particularly those with established systems, the change can be daunting. Picking up the phone to communicate an update and making a note in your file won’t suffice. All updates must be recorded in the system.

You’ll have problems if you don’t use the system properly, Serrao says. “If you’re going to use it, you should strive to be platinum certified,” he says, referring to training certifications Equator offers.

“Also, beware of a subtle shift some lenders are making from a document-driven to a data-driven process in which you’re expected to do data entry,” Thompson says. “It’s one thing to upload a financial statement form that has been completed by the seller and quite a different thing to enter the data on an online form. There’s a risk of introducing an error that could cause a problem in an otherwise approvable short sale.”

Setting Expectations

If technology is gaining importance, it still plays second fiddle to experience. “It’s a mistake to assume that the lender will place the short sale in the right program, properly apply program guidelines, or understand state-specific regulations,” says Thompson. If you want to achieve the best possible outcome for the owner—a sale with no deficiency judgment—“fair or unfair, you need to be the smartest one in the room,” he says.

Set clients’ expectations at the outset. “I tell the seller and the buyer’s agent up front that I’m going to come down hard on them because we need those documents signed and back the same day,” Willette says.

If you’re working with buyers, you need to assess their readiness. “Not all buyers have the temperament for a short sale,” Thompson says. “Those who require a dependable closing schedule or lack flexibility probably aren’t the best candidates.” You also need to learn as much as you can about the listing and listing agent. Ask: How many short sales have you done? Have you had any hardships? Has an appraisal been done yet? Which lenders are involved?

Serrao finds about 10 properties in his buyers’ range, then does a phone interview with each agent. But just asking the questions isn’t useful unless you know why you’re asking, he says. Experience with different lenders will tell you, for example, whether the process will extend beyond your buyers’ time frame or the holder of a second lien will stand in the way of the sale.

Banks Are People, Too

Knowledge gives you bargaining power. “Agents will come in with a $300,000 offer. They’ll be dealing with the lowest-level bank employee, and the BPO will come in at $320,000,” says Serrao. “They have worked on this for months, but they’ll walk away and say, ‘We tried our hardest.’ They don’t know there’s another way to go.”

That other way is to escalate. Willette has established relationships up the chain of command, enabling him to cut 30 days off the typical four to seven months it takes to close a short sale, he says.

“There’s an art and science to escalation—when to do it, how to do it,” says Serrao, who—with his wife, Stella—has closed more than 80 short sales since 2007. “We do it when the price is right. We have upper-level contacts with almost every bank.”

“Many practitioners don’t want to do short sales because they don’t think they can get it done,” Willette says. “Counter back to the banks! You can always provide comparables to support your value. If you’re weak, they’ll run right over you. And ask the seller to contribute. These second mortgages take huge hits; they can’t give you a dime. You have to have a backbone.”

It’s time-intensive work. “At any given time, I’m negotiating 20 short sales,” Willette says. “There are many nights I’m in the office until 4:30 a.m. going through every file, so I’m ready if there’s a request. You have to be organized and know where each file is in the process.”

Deals can turn suddenly. “In one case, we had a cash buyer and bank approval,” Willette says. “Two days before closing, the bank said it was countering the offer by $15,000.” Willette jumped in his car and captured photos of comparables to show why the lower offer should stand. “Finally we got it done,” he says. “The negotiators said, ‘You physically took the transaction in hand. Ninety percent of agents wouldn’t do that.’ ”

Serrao recently worked with a transferee whose house was $150,000 underwater. His parents had cosigned the loan, and he didn’t want to hurt their credit. “Because he was current, the bank denied him,” says Serrao, who reached out to a senior vice president and succeeded in changing the decision.

But while experience and perseverance can reduce the failure rate on short sales, you’ll still have disappointments. Serrao worked with one couple who had fallen behind on a property after both lost hours in their jobs. “Things just soured over eight months. We escalated, but we couldn’t get through [to the bank] that this was a true hardship. The home went into foreclosure.”

The point to remember in such a situation is that the bank is not the enemy, Serrao says. “[Bank employees] can be inept, but so can agents. They’re human and they’re overwhelmed. You’ll send them paper. They’ll lose it. You’ll send it again. That’s just the way it goes.”

In 2009, the U.S. Treasury Department unleashed a torrent of new acronyms for servicers, all under the umbrella of Making Home Affordable. MHA provides guidelines and incentives to lenders to encourage mortgage modifications and to facilitate short sales or deeds-in-lieu of foreclosure in the event a modification isn’t possible or doesn’t work.

Lenders start by qualifying borrowers through the Home Affordable Mortgage Program. Those who are eligible for HAMP (based on the size of their mortgage and their financial situation) but don’t qualify for a modification may be considered for the government’s Home Affordable Foreclosure Alternatives program. HAFA offers:

• Guidelines for completing short sales and deeds-in-lieu of foreclosure.
• Incentives for servicers and investors.
• Moving expenses for sellers.

HAFA has been roundly criticized for falling short of its goals. But for all the talk of HAFA not delivering the results that were expected, it’s a government program that has made a difference, says default industry consultant Scott Thompson of Sacramento, Calif. “The discussions that led to the adoption of HAFA and extensive follow-up dialogue have brought focus to many of the critical issues that need to be resolved for the short-sale process to work better.”

Travis Hamel Olsen is COO of Loan Resolution Corp., in Scottsdale, Ariz., a component servicer that takes on short-sale files for many of the country’s largest lenders. His company handles thousands of HAFA short-sale files every month. “The rules and guidelines in the HAFA program are noticeably improving the overall short-sale process,” Olsen says. “It has urged servicers to move in a proactive direction and adopt a more standard set of short-sale guidelines.”

5 Ways to Gain Confidence in Short Sales

1. Take a course to help you understand the basics. NAR’s Short Sales & Foreclosures Resource certification (realtorsfr.org) is one option. To become certified, you listen to three recorded webinars (free), take a one-day course either live (the cost varies by provider) or online ($115), and pay a $175 application fee. Don’t expect the course to make you an expert, though; that comes from experience. “The short-sale landscape, with all the new and changing programs, guidelines, and regulations, requires a real effort from practitioners who are committed to staying current,” says default-industry consultant Scott Thompson.

2. Network with peers. Talk regularly with agents and brokers in your areas and from around the country to share issues and ideas and gain a well-rounded perspective on the broader short-sale market.

3. Review pertinent federal and state guidelines. It’s important to know not just the federal rules but what’s going on in your state, Thompson says, because a variety of state statutes have been enacted to address foreclosure processing improprieties, taxation of mortgage debt forgiveness, and liability for deficiency balances after a short sale or foreclosure. Just remember: Don’t give legal advice unless you’re also an attorney. Always recommend that short sellers retain an attorney—preferably one with knowledge of tax and bankruptcy law—to help them navigate the sale.

4. Identify a strategic partner. That could be another salesperson in your area with the expertise and willingness to work with you or a third-party company. One such company is Dallas-based Wingspan Portfolio Advisors, says Thompson, who is working with the company to refine its short-sale process. Wingspan was founded in 2008 to serve the interests of mortgage insurance companies and subordinate lien holders. Leveraging its servicer and mortgage insurance relationships, Wingspan will be rolling out a “Certified Short Sale” program in late January that will provide pre-negotiated MI and junior liens, along with lender-approved price targets, all designed to smooth short sales. “We’d already been working on the toughest parts of the short-sale process with MI and the seconds,” says Chris Plummer, managing director of Wingspan Real Estate Network. “We feel we can be that partner that could make a real difference for agents.”

5. Seek your broker’s guidance. As you work on short sales, meet regularly with your broker to discuss file documentation, disclosure, and office policy issues.

From HeraldTribune.com

By: Michael Braga

But the free-fall already may have ended, and some experts say that six out of every 10 homes and condominiums sold over the next two years will be either a foreclosure or short sale.

Part of that prediction played out in December when — despite the holidays — foreclosure filings in Manatee, Sarasota and Charlotte counties rose 18 percent from November and nearly 30 percent from a year ago, according to numbers provided Wednesday by RealtyTrac Inc., a California market research firm.

The flood of distressed properties this year and next could have impact on pricing, though observers seem divided on that point.

Last year, there were 11,476 foreclosure actions compared with 25,336 in 2010 and 22,729 in 2009, RealtyTrac’s data showed.

“What happened is that people stopped giving their homes to banks after uncontested rocket-docket hearings,” said Jack McCabe, a Deerfield Beach real estate consultant. “They started getting lawyers and those lawyers discovered that banks had been presenting improper and sometimes fraudulent documents to the courts. Once that sank in, banks realized they had a disastrous problem. They had to fire their old attorneys and hire new ones who had to review all their files.”

There were 371,000 open foreclosure cases in Florida at the end of 2011, McCabe said. It took the new attorneys the whole year to determine which of those cases could stand the test of the judicial foreclosure process and which could not.

Now McCabe expects the rate of foreclosure filings to rise for the next 18 months.

“On top of that, we are going to see more banks solicit short sales on the homes they can’t bring to foreclosure,” he said.

The spike in filings during December did not carry across Florida or the nation. State filings fell slightly from November and dropped 4.5 percent from a year ago. Nationally, filings were down 9 percent from November and 20 percent from a year ago.

But most foreclosure experts agreed that the long lull caused by the robo-signing crisis was coming to an end.

“There were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets,” said Brandon Moore, RealtyTrac’s chief executive. “We expect that trend to continue this year, boosting foreclosure activity for 2012 higher than it was in 2011, though still below the peak of 2010.”

There are about 900,000 properties in Florida that are in some stage of distress — 370,000 already in foreclosure and another 530,000 with mortgages that are 90 days past due, McCabe said.

Of those, about 720,000 will have to be sold through foreclosure or short sales within the next 18 to 36 months, McCabe predicted.

He thinks that will push prices down about 5 percent.

But others in the real estate business think low inventories will allow the market to absorb the properties without a significant impact on pricing.

“For properties under $250,000, there is a 3.5-month supply. That represents a strong sellers market and prices are starting to go up in those ranges,” said Ron Pepka, the broker-owner of Keller Williams Realty on the Water in Bradenton.

Prices for homes in the $250,000 to $600,000 range are holding steady, while prices above that level are still falling. “Above $600,000 there are still 18 sellers to every one buyer,” Pepka said.

But by the measure of median price — the point at which half of homes sold for more and half for less — Pepka predicted that an increase is more likely than a drop.

Shannon Moore, broker-owner of GreenLionRealty.com in Port Charlotte, agreed.

“To find something decent under $100,000 is hard, hard, hard,” Moore said. “Before, there were tons and tons of them. But now when a house comes on the market under $100,000, it is not uncommon to get 10 to 15 offers.”

Moore said there are still plenty of vacant houses in Southwest Florida, including four of the 15 houses on her own street, but so far only a few foreclosures have been coming on the market each month.

That is partly because investors are snapping up foreclosures at courthouse auctions, which means the homes are never listed for sale on the Multiple Listing Service.

More distressed properties also are being sold through short sales, where banks permit owners to sell for less than is owed on the mortgage.

“Short sales are coming through much quicker than foreclosures,” Moore said.

The trend is likely to accelerate, with many experts predicting that 2012 will be the year of the short sale.

“I think a lot of people who were in denial — like deer in the headlights — are waking up to the reality that they are hopelessly upside down in their homes and they want to get out,” said Bob Saltzman, regional manager for Advantage Mortgage in Tampa.

Saltzman predicts that more homeowners will stop looking at a short sale as an emotional decision and start looking at it as business decision. They will realize it will take more than a decade for housing prices to return to their 2005 levels, and that in the meantime, they could be saving money by moving into a rental.

“There is less stigma to defaults now,” Saltzman said. “People have to realize that this crisis is much bigger than they are. It is a multi-generational disaster that originated from the top down — from the top of Wall Street and Washington. It’s bigger than any one person. So they should’t put it all on their shoulders.”

McCabe, the Deerfield Beach consultant, thinks modifications will be another important factor tempering the number of foreclosures this year.

“At least one bank — JPMorgan Chase — is doing what I said was needed all along,” McCabe said. “It is quietly and selectively offering principal mortgage write-downs.”

McCabe knows an owner with a $450,000 loan on her condominium who received a $200,000 principal write-down from JPMorgan Chase.

“I believe other major banks will follow Chase’s lead,” he said.

Moore, the Port Charlotte broker, said the changes to the federal government’s Home Affordable Refinance Program due out in March also could help many underwater homeowners.

The broker owes $180,000 on a house that is now worth $120,000. Through the HARP program, she may be able to reduce her interest rate from 7.5 percent to 4 percent and that might be enough of an incentive to stay.

“I think programs like this will cause fewer foreclosures in the year ahead,” Moore said.

From FoxBusiness.com

By: Michele Lerner

From MSNBC.com

By Martha C. White

It’s a tarnished silver lining for people at risk of losing their houses and homeowners in neighborhoods blighted by bank-owned properties, but the robosigning scandal that slowed the foreclosure process to a crawl appears to have increased lender interest in short sales.

“Foreclosure sales are pretty devastating,” said Faith Schwartz, executive director of Hope Now, a resource for homeowners facing foreclosure. “We’d much prefer a modification, but if [homeowners] don’t quality, then the next best alternative is deed-in-lieu or short sales.”

Short sales, in which the lender agrees to let the owner sell the home for less than the amount owed on the mortgage, and foreclosures both climbed in 2010, but while short sales rose by 26,000 this year, the number of foreclosures fell by 255,000, according to Hope Now. Short sales, along with deed-in-lieu of foreclosure deals in which the lender takes the deed essentially as payment for the mortgage, still upend families, torch credit ratings and hurt neighboring property values, but they’re far less toxic than foreclosures.

Short sales are better for homeowners. They can stay in their homes, and the quicker process means they can begin rebuilding their credit sooner. Credit scoring firm Fair Isaac Co., which developed the FICO score, says foreclosures and short sales slash the same number of points from a homeowner’s credit score. Homeowners with short sales may be able to obtain a loan sooner than foreclosed homeowners, though, which can improve their credit.

In some states, mortgage lenders can pursue a delinquency judgement against homeowners for the difference between the amount due on the mortgage and the purchase price at a foreclosure auction. A delinquent homeowner engaging in a short sale has an opportunity to negotiate away the bank’s right to sue for that judgement.

The biggest plus for banks is that they stand to make more from a short sale than a foreclosure. According to foreclosure specialists RealtyTrac.com, the average price of a foreclosed home in the second quarter of 2011 was $164,217, while the average price of a short sale was $192,129.

Besides yielding less, foreclosures also cost lenders more in legal and administrative resources. “The incentives against foreclosing are even larger now,” Karen Dynan, co-director of the Economic Studies program at the Brookings Institution, said via email. “Servicers are facing enormous staffing constraints because they are trying to deal with so many distressed properties, so it is probably even harder now to find the staff to do the paperwork for the foreclosure.”

Lenders are also spending more on due diligence, she said. “Servicers and lenders are being heavily scrutinized right now so they probably are more worried than ever about making a mistake in a foreclosure that could subject them to legal liability in the future.”

Neighborhoods also benefit from short sales rather than foreclosures. “Short sales typically sell at less of a discount than foreclosure sales do,” Jed Kolko, chief economist at real estate website Trulia.com, said via email. “Also, foreclosed homes often sit vacant while short sales are re-occupied more quickly. For both these reasons, short sales tend to depress neighboring property values less than foreclosures do.”

Another issue that plagues foreclosures is vandalism, either from opportunistic criminals preying on vacant homes or from disgruntled homeowners. “It’s often not a friendly process so you frequently have cases where people deliberately vandalize homes,” Dean Baker, co-director of the Center for Economic and Policy Research, said.

Some economists worry that the drop in foreclosures is less an indication of lenders’ willingness to compromise and more a function of a huge backlog of foreclosures that haven’t been processed. “Foreclosures are going to be a drag on the market for along period of time,” Baker said. Until these distressed homes are resold and assimilated back into the market, real estate prices can’t stabilize.

Baker added, though, that lenders facing years’ worth of legal wrangling and costs to execute a foreclosure may be more willing to accept a buyer’s offer in a short sale.

The other caveat is that short sales aren’t an option for all distressed homeowners. Short sales are contingent on the ability of sometimes multiple lenders to agree on a price that a buyer is also willing to pay. For people who took out multiple mortgages or have other liens, this presents a challenge. “It’s just a little more complicated when you have more parties involved,” Schwartz said.

From Las Vegas Review-Journal

By: Hubble Smith

The inventory of bank-owned homes in Las Vegas is shrinking and the market will lean more toward short sales in 2012, Prudential Americana Group owner and broker Mark Stark said.

Lenders have to reconcile with political pressures in a national election year, a new Nevada law clamping down on fraudulent foreclosure filings and a stagnant economy, all of which will affect the local housing market, Stark said.

It shouldn’t significantly deter the upward swing from 2011, he said.

“I see much of the same in 2012, which is a really good thing,” Stark said. “One thing we have going for us is affordability.”

The numbers show stabilization in Southern Nevada’s housing market. Existing-home sales are up, driven primarily by investors buying at bargain prices. There could be a slight price influx, but nothing significant, Stark said.

The Greater Las Vegas Association of Realtors reported 89,266 transaction “sides,” or agent representations for both the buyer and seller, through November. That’s 44,633 home sales.

Prudential Americana, which acquired Century 21 MoneyWorld in Las Vegas and Prudential Arizona Properties in 2011, captured a 9.6 percent market share of those closings with 8,620 sides, Stark said.

“I see no reason why those numbers won’t continue to increase, with the economy moving in a positive direction and if we don’t have any unforeseen challenges,” Stark said. “I’m not looking to kill a bear. Growth will be internal. If you depend on the market to grow, you’ve got a problem. You can’t live like that. You should be able to move the company forward even if the market stays flat.”

Realtors are closely monitoring notices of default, the first step in foreclosures, after Assembly Bill 284 became law on Oct. 1. The law aims to hold lenders accountable for providing required documents to foreclose. It has slowed notices of default filings in Southern Nevada.

There has been a notable shift away from real estate-owned, or bank-owned, closings in favor of short sales and traditional sales, which is consistent with the contraction of REO listings, Stark said.

Las Vegas-based SalesTraq is showing a bank-owned inventory of 6,405 homes in November, down about 50 percent from 12,581 in the same month a year ago. Homes for sale on the Multiple Listing Service without a contingent offer decreased to 11,086 in November from 15,855 a year ago, with 47 percent of them listed as short sales.

Rick Brenkus of Keller-Williams Realty sees some positives for the Las Vegas housing market in 2012, but also some concerns. Chief among them is the reduction in REO inventory because of AB 284.

“That’s creating a little slowdown but I think the banks will work through their shadow inventory first. They’ll find a way through this process,” Brenkus said.

On the positive side, mortgage interest rates are at a 50-year low, and short-sale candidates will take advantage of the Debt Relief Act that expires at the end of 2012, he said. The act eliminates second-mortgage debt on short sales, or homes sold for less than the mortgage owed.

“That may equalize the inventory with less REOs and more short sales,” Brenkus said.

Brenkus and his team completed about 300 sales transactions in 2011, consistent with 2010 numbers. He expects to see an uptick in short sales this year as banks have streamlined approvals. Whereas short sales took eight months to a year to get approved a couple years ago when they were new to the market, some are completed within a week now, Brenkus said.

Median home prices will probably stay where they’ve been the last six months, between $120,000 and $125,000, he said.

With all of the outside market influences, 2012 will be the toughest year yet for Las Vegas, said Steve Hawks of Platinum Real Estate Professionals. The revamped Home Affordable Refinance Program, foreclosure rental programs and AB 284 will all greatly reduce inventory, he said.

“We definitely will start the year out very low on available inventory and that trend will continue past the election,” Hawks said. “As of today, there have not been any major banks to file notice of defaults. If that continues much longer, it will cause an artificial shortage of inventory.”

Homeowners who aren’t faced with the threat of foreclosure, or notice of default, will hold off putting their homes up for sale, he said.

There will be a “bump and dump” cycle in 2012, much like the tax credit cycle, as banks figure out how to deal with new law, either by judicial or nonjudicial foreclosure. This artificial spike will give flippers an unprecedented opportunity to lock in profits, the real estate expert said.

Short-sale volume will be similar to 2011, about 900 to 1,500 a month, Hawks said. The percentage may be higher because fewer bank-owned homes and trustee sales are put on the market.

Short sales didn’t increase in other states where similar laws were passed. Foreclosures still outnumber short sales in Florida and New Jersey, where it takes more than 900 days for banks to foreclose.

“To increase short sales, states need to look to the federal level,” Hawks said. “The government’s own watchdog has admitted that all these HARP and HAMP programs have delayed the housing recovery and 2012 will be another delay.”

Anthony Martin of LV Default, a company that buys investment homes at trustee auctions, said the temporary drop in notices of default probably won’t affect the pipeline dramatically. It’s only expected to create a 10 percent to 20 percent drop in trustee sales starting in February , he said.

“Many banks canceled sales and never brought them back again as an NTS (notice of trustee sale),” Martin said. “They are what I call ‘vapor foreclosures’ because they are floating out there in limbo, waiting for the bank to make a decision as to what to do with them. Many of those homes — tens of thousands of them — may be coming back around during this thin calendar period. After all, the banks have to generate money somehow to keep making those new loans.”

Source: Chicago Tribune

By: Pamela Dittmer McKuen

Foreclosures are an unfortunate circumstance for borrowers and lenders, but community associations also take a hit. Struggling owners who owe more than their homes are worth often are behind in their assessments as well as their mortgages. Associations are lean operations, and when just a few owners don’t pay, the rest must make up the difference or leave bills unpaid.

A short sale can be a satisfying resolution for all parties, say many real estate and association professionals.

A short sale is a real estate transaction in which the seller’s lender agrees to accept less money than the amount owed on the mortgage. Lenders prefer short sales over foreclosures because foreclosures are more expensive and time-consuming, said Eric Hamilton, a mortgage consultant with Wells Fargo Home Mortgage in Aurora.

“A short sale could take six months, but foreclosures are taking years, and there is no end in sight,” said real estate agent Kelly Bitto of ReMax Action in Lisle.

In a short sale, sellers are relieved of their burdensome mortgages, and their financial recovery is faster than if they go into foreclosure, she said.

“They can get into another house in a year or two,” she said. “A foreclosure will affect their credit rating for about seven years.”

Associations benefit by getting a payoff at closing and a new owner who, presumably, will be paying assessments in a timely fashion, said association attorney Dawn Moody of Keough & Moody in Naperville.

Property values

Privacy is another advantage. Short sales aren’t obvious to everyone who passes by.

“There’s a For Sale sign in the yard, just like any other sale, and then it’s gone when the house sells,” Hamilton said. “With a foreclosure, you’ve usually got grass growing and back assessments piling up. People know what’s happening, and that’s not good.”

Short sales also are better than foreclosure sales for property values, Moody said.

Final prices generally are in line with current market conditions, not at the market peak of a few years ago but not at desperation lows, she said.

On the other hand, short sales aren’t simple or speedy. They take more paperwork and more levels of approval. Different lenders have different requirements, so not every underwater homeowner qualifies.

And the association might not be paid in full. “The association negotiates for how much money it will accept,” said Moody. “You can’t waive assessments, but you usually have late fees and fines in the total amount, and that’s money you can work with. At least you’re getting money into the association, which wasn’t happening before.”

Evictions

Associations can’t initiate short sales, but they have other options for recouping past-due funds. One is a legal maneuver called a forcible entry and detainer. They can get a judgment that grants them temporary possession of the unit, evict the owner and rent out the unit until the delinquency and related costs are satisfied. Then possession is returned to the owner.

Eviction sounds heartless, but associations can’t function without assessment income, said Moody.

She said a few years ago, when foreclosures took nine months to complete, some associations preferred to wait for a new owner rather than evict a neighbor. Today they are more receptive to the idea because foreclosures take so long and many lenders don’t pay assessments during the process.

“Now the bottom line is so ugly, they have no choice,” Moody said.

Associations can receive six months of back assessments when a foreclosed unit is ultimately resold, but only if they have taken precise steps to collect the delinquency, she said.

“If assessments haven’t been paid in three years, six months is all you’re going to get,” said Moody.

Seeing an eviction notice posted on the front door is sometimes enough of a scare tactic that the delinquent owner finds the money to pay up, said Bitto.

Some associations file liens against delinquent owners’ units, a tactic Moody doesn’t recommend. First, the governing documents already establish the association’s lien, so there is no need to spend money on legal fees to duplicate that effort. Second, payoff can take many years.

“They pay you only when they want to sell,” she said.

From Housingwire.com

By: Kerri Panchuk

November short-sale transactions in Orlando increased 39.4% over last year, buoying the median home sales price in the market by 9.52%, the Orlando Regional Realtor Association said Wednesday.

The median Orlando home sales price last month was $115,000. In the short-sales segment, the median selling price jumped 7.1% from last year, with the average short sale going for $106,000.

The association attributes the year-over-year sales price increase to an influx of short sales.

“The increase in completed short-sales transactions is heartening,” ORRA Chairman Mike McGraw said.

McGraw claims short sales in Orlando now make up 73% of all pending home closings.

The uptick in November home sales prices is good news for sellers, but could mean buyers will see slightly higher asking prices in the future, the association reports.

Since January, Orlando’s median home sales price has grown by more than 21%, ORRA said.

Meanwhile, the median price for bank-owned sales hit $81,999 in November, up 4.1% from last year. Bank-owned sales also represented more than 23% of all transactions.

Fannie Mae’s November housing survey echoed some of the trends reported in Orlando, with the GSE’s economists noting that consumer sentiment on the trajectory of home prices improved in November. The report said consumers remain cautiously optimistic.

Credit Suisse (CS: 22.58 0.00%) released a report Wednesday, saying home prices are now in line with consumer buying power. Based on this information, Credit Suisse analysts now expect home prices to stabilize next year.

From DSNews.com

By: Carrie Bay

“Foreclosures are going to go up before they go down,” according to Craig Nickerson, president of the National Community Stabilization Trust.

Nickerson says estimates put foreclosure tallies at 850,000 this year, as high as 1.5 million in 2013, and then back to the levels we’re at today by 2015.

With all these distressed properties potentially making their way to an already stressed marketplace, Nickerson, along with a panel of industry professionals at the inaugural MPact Conference advocated for bulk short sales.

The panel discussion centered around neighborhood stabilization initiatives and HUD’s $7 billion program created to facilitate the rehabilitation of properties in communities challenged with high levels of foreclosures and property vacancies – aptly named the Neighborhood Stabilization Program (NSP).

“Foreclosure prevention by itself is not going to [be the] cure” for the housing crisis, Hala Farid, deputy director of Citigroup’s Office of Homeownership Preservation, told those attending the standing-room-only session.

Farid says Citi is devising a procedure where NSP program participants will have access to escalated points of contact to expedite the short sale process in support of neighborhood stabilization efforts.

Francis Martinez Myers, president of Employee Transfer Corporation (ETC) and ETCREO Management, said the industry is “on the cusp” of utilizing short sales as a viable means of stabilization, “but it’s not without its challenges,” she added.

“Lenders have to be aggressive about offering pre-approved listing prices for short sale properties,” according to Myers. She says having pre-approvals in hand would help facilitate transactions for bulk short sales.

Myers described the size and magnitude of this crisis as unprecedented. “I feel like we are in a five-alarm fire and we are still negotiating over which kind of garden hose we’re going to use … If we’re not careful and not aggressive, it’s going to be very difficult to get through this,” she said.

“Holistically we’re not doing enough fast enough,” according to Myers. Just “selling one house at a time, means 10 years from now we’ll still be here having this conversation,” Myers said.

She spoke of the advantages of tailoring services that are geared toward investors and nonprofit groups to facilitate bulk purchases of short sale properties.

Myers says her organization is working on a pilot initiative which aggregates available short sales in the market, pools together properties meeting investors’ and nonprofits’ qualifications, and lines them up for inspection.

Tyler Smith, VP of Wells Fargo’s REO disposition team, noted that managing investor participation with communities’ neighborhood stabilization efforts “can sometimes be a conflict of interest.”

According to Jerome Devadoss, manager of alternative dispositions for Fannie Mae’s REO sales operation, it’s important to engage community-minded investors to work alongside local nonprofits toward neighborhood stabilization, whether it’s through short sales or any other loss mitigation strategy.

Jim O’Donnell, manager of the West Coast REO Revitalization Program at Chase, says his company is exploring ways to facilitate short sales to nonprofit organizations. Chase is looking to make short sales and distressed portfolios part of its “First Look” program.

Short sales are increasingly making their way into the conversation as a practicable solution to support neighborhood stabilization.

Eric Will, senior REO sales director for Freddie Mac’s HomeSteps division, said “knowledge around this [short sale] space is growing. We know it needs to be done.”

From Housingwire.com

By: Jon Prior

Freddie Mac will force parties involved in a short sale to sign affidavits making them liable for their negligent or intentional misrepresentations in the deal, an effort to be sure it’s an arms-length transaction, according to guidance released Friday.

The new affidavit will go into effect Jan. 1, but Freddie is asking servicers to implement the change immediately to fight fraud. However this, and other changes, are meant to expedite the process of getting borrowers in default relocated.

In August, the government-sponsored enterprise alerted real estate agents to the rise in shady short sale deals. The main concern is flopping. There is a growing trend of real estate agents on the buy-side of the deal failing to disclose other bids on the property, rigging the sale at a lower price.

The fraudsters can then flip it, sometimes the same day, and pocket the difference.

In the third quarter, Freddie completed 11,744 short sales and deeds-in-lieu of foreclosure, according to its financial statement. It completed nearly 33,500 of these two foreclosure alternatives in all of 2011.

CoreLogic (CLGX: 12.37 -2.37%) noted an increase in property fraud in 2011 tied specifically to flopping.

“With this change, you will have more information to identify potential mortgage fraud and a clearer understanding of the intent of all parties involved in the real estate transaction,” Freddie said in the guidance to mortgage servicers.

The guidance put out Friday also trimmed other rules to help servicers speed up the loss-mitigation process.

The GSE also required all amounts paid in the transaction, including anything going to the borrower, be documented fully in the HUD-1 Settlement Statement.

Freddie eliminated the requirement that borrowers more than 120 days delinquent have to list their home for sale before becoming eligible for a deed-in-lieu.