Short Sale Commander Blog

From Bloomberg.com

By Kathleen M. Howley

U.S. home prices may get a boost from an unlikely source: a pickup in sales of properties in default before they reach the stage where they are repossessed by the bank and sold.

There has been a “dramatic shift” in banks’ willingness to sell a property for less than the mortgage balance to avoid foreclosing, said Ron Peltier, chairman and chief executive officer of HomeServices of America Inc., the second-biggest U.S. residential brokerage.

The transactions, known as short sales, typically change hands at a discount of about 20 percent to homes not in financial distress, compared with a 40 percent price cut for bank-owned homes, according to RealtyTrac Inc. Short sales jumped 19 percent in the second quarter from the prior three months while foreclosure sales were flat, the data seller said.

“Banks have become much more supportive of short sales,” said Peltier, whose Minneapolis-based company is a unit of Warren Buffett’s Berkshire Hathaway Inc. “That’s better for the lenders, who have smaller losses on a short sale, and it’s going to be better for homeowners, who won’t have as much psychological distress as a foreclosure.”

Distressed sales brokered by HomeServices used to be 60 percent foreclosures and 40 percent short sales, Peltier said in an interview at Bloomberg headquarters in New York. Now, that ratio has flipped, according to the CEO, whose company is second in size to NRT LLC, a unit of Realogy Corp. in Parsippany, New Jersey, that owns the Coldwell Banker brand.

Default Backlog

“There’s a huge backlog of homes in default that the banks want to get rid of,” said Thomas Popik, research director for Campbell Surveys in Washington. “They don’t want to be homeowners.”

Banks are being more agreeable to short sales as foreclosures slow following a yearlong probe of so-called robo- signing, or pushing through unverified default documents. Foreclosure filings have fallen for 12 straight months through September as banks work through a backlog of paperwork, according to RealtyTrac.

Almost a third of all home transactions in August were foreclosures or short sales, according to the National Association of Realtors. While short sales were flat compared with a year earlier, the trade group’s count only includes deals completed with a broker, and short sales often are handled directly with lenders.

Quicker Approvals

Banks are not only approving more short sales, they’re doing it in less time. In the second quarter, short-sale homes, also known as pre-foreclosures, sold an average 245 days after default, down from 256 days in the previous period, according to Irvine, California-based RealtyTrac. That reversed three straight quarters of increases.

The time frame remains a lot longer than traditional sales. In a normal transaction, a buyer bids on a home and gets a decision from its owners within days, if not hours. Getting a bank response to a short-sale offer can take two months or more.

“No matter how streamlined a short sale may be, it’s always going to be a frustrating experience,” Popik said. “Too many people are involved — investors, servicers, owners, real estate brokers, mortgage insurance companies.”

Half of troubled mortgages have so-called second liens, such as home equity lines of credit, according to the Treasury Department, so there may be two mortgage holders with a stake in a short sale. If the property has mortgage insurance, that company may be involved in the negotiations as well.

Neighborhood Values

Because short sales typically are occupied soon after the deal, neighboring properties take less of a hit in values, according to Popik. Prices for distressed homes often are used by appraisers to gauge surrounding values, even if the nearby homes aren’t in default. Also, owners who voluntarily give up their homes tend to leave them in better shape than people who are evicted, reducing costs for banks, he said.

“Anytime a short sale can be substituted for a foreclosure, it’s going to prop up prices and it’s going to cut losses because it’s going to sell for more,” he said.

Home values have declined 31 percent in the last five years, according to the S&P/Case-Shiller index of values in 20 U.S. cities, as competition from foreclosures pressures sellers to lower their asking prices. The resulting crash was worse than the 27 percent plunge in values during the Depression, said Stan Humphries, chief economist of Zillow Inc., a Seattle-based real estate information company.

Underwater Borrowers

The drop in home values has pushed almost a quarter of U.S. mortgage borrowers underwater, meaning their debt is more than their homes are worth, according to a report by CoreLogic Inc. (CLGX), a real estate data company in Santa Ana, California. That so- called negative equity prevents owners from conducting traditional deals because they would have to pay the difference between their loan balance and the sale price.

Short-sellers can negotiate with banks to forgive the unpaid portion, according to Steve Beede, an attorney in Fair Oaks, California, who specializes in dealing with loans in default. Even if they succeed, a second-lien holder in most states can pursue people for mortgage-payoff shortfalls, he said.

Banks are starting to “get their act together” with short sales, said Cameron Novak, a broker with The Homefinding Center in Corona, California. The company handles about 15 of the transactions a month, he said.

“There’s been improvement in the last few months, and response times are getting to be a little quicker,” Cameron said in a telephone interview. “It’s about time.”

Improving access to affordable mortgage financing for qualified home buyers and investors and committing additional resources to loan modifications and short sales will help reduce current and future inventories of real estate owned (REO) properties held by government agencies, according to the National Association of REALTORS®.

In a letter sent today to the U.S. Department of Housing and Urban Development, the Federal Housing Finance Agency, and the U.S. Department of the Treasury, NAR responded to the agencies’ recent request for input and offered its recommendations for selling REO properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration.

In its letter, NAR urged the agencies to create an advisory board as they explore new options for selling foreclosed properties to ensure that efficiently disposing of agency REO properties will minimize taxpayer losses and reduce the negative effects that distressed properties have on local real estate markets.

“As the leading advocate for housing issues, REALTORS®know that foreclosures affect families, communities, the housing market and our nation’s economy,” said NAR President Ron Phipps. “We believe the government has an opportunity to minimize the impact of distressed properties on local markets by expanding financing opportunities, bolstering loan modifications and short sales efforts, and enhancing the efficient disposition of REO properties. This will help stabilize home prices and neighborhoods and help support the broader economic recovery.”

Phipps said that the lack of available and affordable mortgage financing is hurting REO sales and the entire housing market, and urged increased consumer and investor lending. While NAR supports strong underwriting standards, the lack of private capital in the mortgage market, unduly tight underwriting standards, and increasing fees have discouraged many potential home buyers from applying for mortgages. NAR believes ensuring mortgage availability for qualified home buyers and investors will help absorb the excess REO inventory.

To prevent further REO inventory increases, NAR also recommended that the agencies take more aggressive steps to modify loans and, when a family is absolutely unable keep their home, to quickly approve reasonable short sale offers that allow families to avoid foreclosure. Phipps said that while federal programs have been put into place to help keep families in their homes, many of these have fallen short of expectations, and advocated that those resources be applied toward modifying loans and expediting short sales, which are typically less costly than foreclosure.

“Loan modifications keep families in their home and reduce defaults, while short sales keep homes occupied, helping stabilize neighborhoods and home values,” Phipps said. “Expanding resources and ensuring the use of already allocated funds for pre-foreclosure efforts is the best opportunity to reduce taxpayer costs and creates more positive outcomes for homeowners and their communities.”

NAR’s letter also outlined concerns about proposals to pool large volumes of REO properties for bulk sales. While these types of transactions may help quickly alleviate high REO inventories, taxpayers would be required to accept larger losses than are necessary. Phipps said that efforts should be made to incentivize individual versus bulk sales, except in small geographic areas that meet certain criteria, since selling in bulk to large national investors puts a large section of the housing market into the hands of fewer market participants and puts individual home buyers and sellers at a disadvantage.

He also said the success of any bulk sale programs should be determined by the stabilizing effect the program has on a locale and whether it maximizes value to taxpayers. Maximizing the recovery on the agencies’ assets will depend on how property valuations are determined and that those valuations are accurate, appropriate, and reflective of market conditions, such as the valuations available through the Realtors Property Resource™, an NAR subsidiary.

NAR is also concerned about proposals that include lease-to-own elements. Phipps said that agency policies should first be focused on keeping families in their homes through loan modifications or short sales if that’s a better option, and that the agencies should not expedite foreclosures so that those properties could be included in a lease-to-own program. He added that any lease-to-own programs should not be administered by the government, but instead should include the participation of local investors or nonprofits that can manage the specialized needs and challenges of the local market.

“REALTORS® welcome the agencies’ desire to receive input and ideas to help address their REO inventory. We look forward to serving on any advisory board and working together with agency staff, real estate professionals, property managers, and others with extensive real estate industry experience to develop sound strategies and solutions to ongoing REO issues,” said Phipps.

Source: NAR

From Housingwire.com

By: Jon Prior

Nearly 11 million properties, roughly 22.5% of all U.S. homes, were worth less than the underlying mortgage in the second quarter, according to CoreLogic (CLGX: 11.63 +1.93%).

The percentage of properties in negative equity declined slightly from 22.7% the previous quarter and down from 24% one year ago. Another 2.4 million borrowers held less than 5% equity in their home, what analysts call near-negative equity. CoreLogic also showed nearly three-quarters of all underwater borrowers are paying above-market interest on their home loans.

“High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery,” said Mark Fleming, CoreLogic chief  economist.

More borrowers could be in danger of falling underwater. JPMorgan Chase (JPM: 32.89 +1.45%) analysts expect home prices to drop another 5% by the beginning of 2012, pushing the amount of underwater borrowers to 15 million, according to a research note released earlier in the month. If prices drop more, possibly 10% further, the number of borrowers in negative equity would approach 20 million.

The Obama administration continues working on a proposal to boost refinancings, which many include eliminating some negative equity restrictions on Fannie Mae and Freddie Mac loans. Some analysts believe such a program would have only modest impact, but CoreLogic showed nearly 28 million outstanding mortgages hold above-market rates and, in theory, should be able to refinance.

Of these, 8 million borrowers are in negative equity.

Some believe the new plan from the administration will be a revamp of the Home Affordable Refinance Program, which allows Fannie and Freddie borrowers with up to 125% LTV to refinance.

But more than 40% of borrowers with LTVs above that limit are trapped with mortgage rates above 6%. Only 17% of borrowers with positive equity have rates at that level.

Negative equity also affects sales. Traditional home sales in areas with low negative equity numbers dropped 61% since the peak in 2005, compared with an 83% drop in areas with more underwater borrowers.

Roughly 60% if borrowers in Nevada were underwater in the second quarter, the highest percentage of any state but down from 68% one year ago. It was followed by Arizona at 49% and Florida at 45%.

“The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices,” CoreLogic said.

No matter how good you are at short sales, you’ll need to know how to escalate a file to management to get the deal closed.  Far too often, you’ll find yourself doing this just days (if not hours) before the closing.  Here’s some common reasons to escalate a file:

- Get an extension on the acceptance letter

- Get a new BPO ordered

- Get changes to the HUD approved in time

- Prove their counter offer is way too high

…the list goes on and on.

Loss mitigation managers get hundreds of calls from impatient agents. You need to differentiate yourself by being organized so you can help them help you.  And keep in mind, the higher up you go at the bank, generally the more ‘sanity’ you’ll find.  This is where Short Sale Commander really helps.

Short Sale Tips for escalating a file to a supervisor:

#1) Give them what they want (HINT: Documentation)

#2) You need to know who to call

#3) Have your ducks in a row

#1) BREAKDOWN:  Give them what they want (HINT: Documentation)

Managers need the simple facts in front of them for them to take action.  For many agents, getting this info to them quickly is where the problem is, which is why they only escalate a file at the last minute, or just give up on the file at the first ‘NO’.  With Commander, you have every document, every conversation, the listing history and all the emails complete with dates & times.  Email them this while you’re on the call, and you’d be surprised at how simple it is to get what you need.

#2) BREAKDOWN:  You need to know who to call

Agents that have closed short sales, have talked to managers before.  The problem is a few months later, they don’t where that contact info is. Also, you should get managers names every time you call, so if and when you DO need it, you’ll already have two or three supervisors you can email.  (Yes – you’ll get at least a name and email 80% of the time you ask).  In the Mortgages Tab, the ‘Level 1 Contacts’ are the setup people and the loss mitigators.  The ‘Level 2 Contacts’ is where you put managers names, numbers & emails. THIS IS IMPORTANT!   These emails even auto-populate into our emailer so it’s easy to copy everyone with that bank with your documentation.  If that manager was helpful, copy it into your Mortgage Company Manager and then it will auto-populate right into the file the next time you have a short sale with that lender.

#3) BREAKDOWN:  Have your ducks in a row

Top short sale agents have everything they need, right at their fingertips.  Most importantly, set tasks so every file gets constant attention and nothing gets lost.  You need to be on top of things, because the banks usually aren’t.  This means you’ve got every conversation, every email, the HUD-1 details, every offer, the listing history, loan numbers and (especially if you’re in a deficiency state) all the seller hardship documentation.   You can even export the activity log for only that mortgage and email it to them.

The moral of the story is this: Stay on top of the file and don’t be scared to escalate it. Do the simple things mentioned above and have a system with the necessary tools to easily escalate a file and you’ll be well on your way to becoming a top short sale agent.  This will help you avoid 11^th hour issues and help you get more deals closed.

From Housingwire.com

By: Jon Prior

The Treasury Department will withhold payments once again to Bank of America (BAC: 7.41 -6.32%) and JPMorgan Chase (JPM: 34.94 -3.75%) for their poor performance modifying mortgages in the second quarter.

Both banks need substantial improvement to their operations within the Home Affordable Modification Program, according to the compliance review conducted by the Treasury.

In the first quarter, the federal agency elected to withhold payments from these two banks and Wells Fargo (WFC: 24.21 -4.04%). Since then, Wells made the mandated improvements. Though some moderate work is still needed from the bank, the Treasury will return previously withheld funds.

If BofA and Chase continually fail to make the corrections, the Treasury could permanently reduce payments to the banking giants.

The Treasury compliance team looked at how each participating servicer performed when contacting homeowners, evaluating them for the program and how they assisted with any questions or document submissions. Including these judgments, the Treasury also looks at HAMP data gathered by Fannie Mae to determine which servicers need improvement.

Since HAMP launched in March 2009, servicers started more than 791,000 permanent modifications with roughly 28,000 reported in July, according to the latest Treasury data. Roughly 1.6 million trials have been extended, and more than 763,000 canceled due to a redefault or not enough information was submitted.

“While tens of thousands of additional homeowners benefit from the administration’s programs each month, we need to keep the pressure on servicers to effectively assist those homeowners who are still struggling and eligible for assistance,” said Treasury Assistant Secretary for Financial Stability Tim Massad.

“We continue to make significant improvements to our processes and controls. We expect future scorecards will reflect that,” a Chase spokesman said.

A Bank of America spokesman said ratings did improve for the bank in nearly all ratings and metrics. One in four of all HAMP modifications belong to BofA, and the spokesman said the bank is committed to preventing foreclosures for unemployed, underemployed and other troubled borrowers.

“We are working to achieve the ratings necessary to reinstate incentives, but we are not driven by that goal,” the spokesman said.

The Treasury uses Troubled Asset Relief Program funds to pay servicers $1,000 for every permanent modification and another $1,000 every year the new loan is current.

Including BofA, Chase, and Wells, 10 servicers still show a need for some improvement, unchanged from the previous review. The Treasury determined American Home Mortgage Servicing, Citigroup’s (C: 28.87 -3.77%) CitiMortgage, Ocwen Financial Corp. (OCN: 12.91 -2.79%) and Select Portfolio Servicing each need to make moderate improvements.

Ally Financial’s (GJM: 21.87 -0.14%) GMAC Mortgage, Goldman Sachs‘ (GS: 106.72 -4.85%) now sold Litton Loan Servicing and OneWest Bank were revised to need only minor improvements.

“These assessments provide an unprecedented level of information about servicer performance and are designed to help more eligible homeowners walk away from this process with better results,” Massad said.

California real estate agents say closing short-sale transactions are “difficult” or “extremely difficult,” and said procedures by mortgage lenders and servicers are only serving to make matters worse over the past six months, according to a new survey.

The lender satisfaction survey was conducted by the California Association of Realtors.

More than three-fourths (77%) of agents said short-sale transactions were difficult or extremely difficult, up from 70% in December, according to the CAR survey. The survey gauges agents’ experiences working with lenders in their most recent transaction. The majority of those surveyed dealt with short-sale transactions — sales in which the lender agrees to accept less than the balance owed on the mortgage. Short sales are one method for homeowners in default on their mortgages to avoid foreclosure.

“Despite promises by lenders to improve their short-sale processes, clearly, they are not doing enough,” said CAR President Beth Peerce. ”Instead of helping struggling homeowners who need to sell and willing homebuyers who want to buy, lenders have created manmade roadblocks that have caused real estate gridlock and hindered a desperately needed housing recovery.”

Real estate agents and brokers cited communication issues as the most frequent obstacle in working with lenders and servicers during the short-sale process, including lenders’ slow response time to a short-sale package (cited by 66% of those surveyed), poor communication with lender representatives (cited by 55%) and repeated requests for documentation (51%).

More than 15% of agents surveyed said the lender foreclosed on the home before the short sale could be completed.

The time it takes to complete a short sale is also a big beef among real estate agents with 67% saying it took more than 60 days for lenders or servicers to return a written response on the approval or disapproval of the short sale.  Additionally, 43% said it took the lender more than five days to return any form of communication.

A full 75% said they were “not satisfied” or “not at all satisfied,” with the experience of working with the lender on a short sale, up from 67% in December.

“With short sales accounting for a fifth of all transactions in California, it’s crucial that lenders improve their short-sale process so that a meaningful recovery in the housing market and overall economy can occur,” Peerce said.

CAR also asked its members to rate which lender was the easiest to work with. Of the top four lenders, 40% said Wells Fargo (WFC: 26.82 -1.76%) was the easiest, while 23% cited Bank of America (BAC: 9.33 -2.20%); 17% said JPMorgan Chase (JPM: 39.18 -1.80%); and 11% said Citigroup (C: 36.341 -2.47%).

The survey was conducted in June.  Most of the Realtors surveyed dealt with Bank of America, Wells Fargo and JP Morgan Chase in their most recent transaction.

From Rismedia.com

By Leslie Berkman

RISMEDIA, July 26, 2011—(MCT)—Under a new state law, any lender who agrees to a short sale—which by definition will yield insufficient funds to cover the outstanding loans on a property—must accept it as payment in full for all loan balances. That is a good thing for upside-down homeowners who need to sell, says the California Association of REALTORS®.

In a prepared statement applauding Gov. Jerry Brown for signing SB 458 into law, the association observed that previously a first mortgage holder could accept an agreed-upon short sale payment as full payment for the first mortgage but a junior lien holder could still hound the seller for the full amount owned on the junior lien.

“The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference,” says association President Beth L. Peerce.

“SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lien holders—those in first position and in junior positions—will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property,” she adds.

Those shopping for a home in the $500,000 to $1 million price range should not tarry. That is because they will probably face higher interest rates and more strict underwriting standards and will need to make a larger down payment later this year when conforming loan limits increase, cautions California Association of REALTORS® President Beth L. Peerce.

“Would-be buyers on the fence need to act well before Sept. 30, when the conforming loan limit is set to be lowered, to avoid a higher cost of homeownership,” Peerce said in a prepared statement.

Lowering the limits on mortgages eligible for purchase by Fannie Mae and Freddie Mac could have a broader impact than on individual homebuyers, says Peerce. “As the housing market tries to gain a more solid footing, the decrease in conforming loan limits that is scheduled for later this year could adversely affect the market,” she says.

Copyright (c) 2011, The Press-Enterprise, Riverside, Calif.

From Rismedia.com

By Tricia Andreassen

RISMEDIA, July 25, 2011—Although real estate professionals understand the importance of having a website, there is a huge opportunity to develop a website more specific to a niche market. If you are working with the short sale market and speaking with distressed homeowners, you know first-hand how different this scenario is versus the traditional real estate listing process. By developing an extremely targeted website focused on the needs of distressed homeowners, you will be able to help them look at their options and, at the same time, generate leads for your business. Here are seven steps to developing a short-sale website.

Use visuals and graphics that relate to how distressed homeowners feel and buy a domain name that reflects the message of the site. Don’t make the homepage graphics all about you—focus on your target group’s emotional mindset instead. For example, homeowners will relate to the picture of the woman at www.KnoxvilleForeclosureHelp.com and they will say to themselves “that is how I feel.” The homepage sets the stage for your site visitors to feel comfortable in taking the next step.

1. Have content that relates to the questions a distressed homeowner may have. They may be hearing the word “short sale” more often but many homeowners still do not understand what that may mean. Provide information that explains what a short sale is, how a short sale is different than a foreclosure and what effects a foreclosure can have on their job or credit.

2. Place calls to action (clickable engagement points) on every page in the site. Have buttons like “Know your options, click here” or “What is HAFA? Click here” or “Free reports” (reports about short sales) to generate their interest.

3. Make sure you have an email follow-up campaign so that when visitors click on the calls to action you can start building rapport with them as well. Remember, the homeowner may want information but then shy away from contacting you just yet. By having an email follow-up plan in place you stay top of mind while they research and look at their options. You want to be the focal point for when they are ready to ask for help and you want to make it easy for them to reach you.

4. Put a language translator element on your site. Not every distressed homeowner in need of help speaks English. Give them the ability to read the information in their language so they can learn their options.

5. Social media is an easy way for those visiting your site to share information. Whether it be an email, a post on Facebook or even a tweet, make it easy for folks to spread the message about what options are available.

6. Add video messages, testimonials and blog entries to your site. A personal video from you about how you help homeowners facing foreclosure will allow the visitor to understand why it’s important to ask for help. Testimonials from homeowners you’ve helped will encourage site visitors to reach out to you for help. Blogging allows distressed homeowners to see your thoughts on what is happening in the real estate industry as well as how knowledgeable you are on this topic.

Tricia Andreassen is CEO/founder of Pro Step Marketing. She is a leading industry Web strategy expert, a nationally recognized speaker with Broker Agent Speakers Bureau, and one of RISMedia’s Real Estate magazine’s monthly columnists. For more information, please visit www.ProStepMarketing.com or call 1-866-799-9888.

From DSNews.com

By: Carrie Bay

A new California law bars junior lien holders from pursuing borrowers to collect outstanding loan balances after a short sale has been completed.

Gov. Jerry Brown signed SB 458 into law on Friday. It requires all lenders that agree to a short sale to accept the approved sale price as payment in full of the outstanding balance of all first and secondary loans.

Last October, California enacted SB 931 mandating first mortgage holders absolve borrowers of any debt deficiency not covered by the short sale price, however that rule did

not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

Local Realtors are hailing the new law as a big step forward for the state’s distressed property market.

“The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference,” said Beth L. Peerce, president of the California Association of Realtors.

“SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property,” Peerce said.

SB 458 contains an urgency clause making it effective immediately. The bill was authored by state Senate Majority Leader Ellen Corbett (D-San Leandro) and initially introduced in February.

San Diego-based DataQuick says short sales made up 17.6 percent of California’s home resales last month.

From NASDAQ.com

By Alan Zibel, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- Federal regulators have agreed to relax a rule that real-estate agents complained was hampering them from assisting consumers trying to negotiate sales of homes that have plunged in value.

The Federal Trade Commission said Friday it would not enforce most of a new rule against real-estate brokers assisting distressed consumers with so-called ” short sales”–ones in which homeowners sell their homes for less than their current value.

The FTC said it recognized that the rule might have deterred real-estate agents from completing those sales. Rather than real-estate agents, the agency’s rule was designed to target for-profit companies that charge high fees to consumers seeking help with their mortgages. The FTC requires disclosure of fees and bars companies from charging those fees in advance.

The FTC now says it will not enforce most of the rule for listened real-estate professionals. They will be allowed to collect advance fees.

Ron Phipps, president of the National Association of Realtors, said the FTC’s move will help “resolve the confusion brought on by unintended consequences” of the agency’s rule.