Short Sale Commander Blog

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.

From Freddiemac.com

By Shelley Poland and Fraud Investigations Assoc. Dir. Robert Hagberg

In a short sale, Freddie Mac agrees to accept less than a full payoff of a mortgage when the borrower is unable to sell their home for enough to pay off their entire loan. Freddie Mac short sales have risen from about 4 percent of completed workouts in 2000 to nearly 14 percent in 2010.

Short sale fraud, also on the rise, enters the picture when real estate professionals fail to disclose affiliations with other parties involved in the transaction to rig sales at a low price and hide better offers from Freddie Mac and the distressed home seller. Then, after the house is sold, the fraudster can flip it a few hours later for the better price and walk away with the profitable difference.

By concealing the higher offer, short sale fraud worsens losses to home sellers, Freddie Mac, and taxpayers. It also throws another wrench into the housing recovery by undermining the trust and transparency at the core of any real estate transaction.

Today, short sale fraud is the top priority for our fraud investigation unit. By working closely with real estate professionals and law enforcement agencies, our fraud unit has identified and stopped a number of fraudulent deals before closing. They have also added the perpetrators to our Exclusionary List – firms and individuals barred from conducting business with Freddie Mac – and worked with law enforcement agencies to prosecute them.

Since short sale fraud requires the cooperation of one or more real estate professionals involved in the transactions, we have begun reaching out to Realtor associations in target markets to educate them about the latest trends in short sale fraud, the red flags to watch for, and what actions they can take to stop it. We strongly believe responsible Realtors are America’s natural first line of defense against such scams.

Trends we have been alerting Realtors about include:

• Falsely indicating on a new short sale listing that there is an offer on a property in order to discourage legitimate offers and protect an accomplice’s planned low bid.
• Manipulating the short sale listing price by making the house look more distressed than it really is (“reverse staging”), inflating repair estimates, or using similar tactics designed to obtain an artificially low home value on the Broker Price Opinion. (Our requirements prohibit the buyer, buyer’s agent, buyer’s attorney, or a third-party short sale negotiator to be the contact point for the agents preparing the BPO.)
• “Flipping” schemes where the fraudster “buys” a house at a short sale without putting down any of his own money and then sells it a few hours (or days) later to a legitimate buyer at a much higher price. These are complex multi-step schemes that use falsified title and/or loan documents to fool a lender into approving the ultimate buyer’s mortgage, which the fraudster uses to settle the earlier closing on the house he “acquired” at the short sale for a much lower price.
• Manipulating the HUD-1 settlement statement so the fraudster can skim away net proceeds from the sale for himself or other parties in the transaction without the seller’s or investor’s knowledge. (The HUD-1 is the document that itemizes all fees, charges, and other funds involved in a home sale.)

As a result of the uptick in short sale issues, Freddie Mac now requires all of the parties involved to sign an affidavit attesting that it is a true arms-length transaction. These affidavits not only deter individual participation but also give us a stronger legal path to enforce our rights.

Fortunately, we have allies in this fight. There are many conscientious real estate professionals who want to do the right thing. We often receive calls in our servicing, quality control, fraud investigation, outreach, and HomeSteps divisions from real estate agents who know they’ve seen something inappropriate and won’t look the other way. They understand that real estate fraud turns a shortsighted profit at the cost of the public’s long-term confidence in homeownership and the housing industry.

That’s why we are reaching out to educate real estate associations through special seminars and Freddie Mac’s web site, where we post the latest fraud prevention information and best practices. If you see fraud being committed – or aren’t sure and want clarification – we encourage you to call the Freddie Mac Fraud Hotline at 1-800-4FRAUD-8 or 1-800-437-2838, as well as your local FBI office, state attorney general, and Real Estate Board.

From the Chicago Tribune

By: Mary Ellen Podmolik

Are short sales getting easier?

It’s something that’s hard to quantify because there are still plenty of horror stories in which a mortgage servicer took months longer than expected to decide on an offer, and the prospective buyers wouldn’t wait or couldn’t agree on a price.

But there is some numerical and anecdotal evidence that some servicers have grown more interested in approving short sales.

Through June, 10,438 homes nationally were sold under the government’s Home Affordable Foreclosure Alternatives program by servicers, and another 316 were returned to lenders in a deed-in-lieu-of-foreclosure arrangement, according to the Treasury Department. That’s a 25 percent increase over the previous month. Meanwhile, the number of Home Affordable Foreclosure Alternatives agreements begun increased 20 percent.

Through their own programs as of May, the 10 largest mortgage servicers had completed or were processing more than 30,000 short sales and deeds in lieu of foreclosure for homeowners whose government-backed mortgage loan trial modifications were canceled and almost 82,000 other short sales and deeds in lieu of foreclosure for homeowners who weren’t accepted for trial modifications.

Individuals whose bread and butter is short sales say they’ve noticed the improvement.

Ever since the beginning of the year, banks have worked to streamline the process, and offers are getting responses in 60 to 90 days in some cases, said Nicole Fabiano, founder of Home Solutions Inc., a company that works with buyers and sellers in short-sale negotiations. Of the last 100 short sales Fabiano’s worked on, only three were through the government program; the rest were in-house deals.

In a short sale, a homeowner, with a lender’s consent, sells a property for less than the amount owed on the mortgage. While the process has been around for years, its use has taken off in recent years as a way for delinquent borrowers to avoid foreclosure. Other sellers seeking short sales are those “upside down,” meaning their mortgages are higher than the value of the underlying real estate.

A property that sells in a short sale is likely to net a better recovery for the bank, and the bank is not subjected to the drawn-out expenses associated with a foreclosure. That’s certainly an issue in Illinois, where courts handle foreclosures, and the process can take an average of 300 days.

But short sales take time, as well, particularly if the property is listed at a price unrealistically below market value that the lender is unlikely to approve.

Kimberly Wirtz-Prince, a Century 21 Pro-Team agent, said she thinks all parties involved in short sales are getting the knack of how to do them. But she still tells prospective buyers to not expect to hear back from a mortgage servicer for three to four months.

One of Wirtz-Prince’s listings, a short sale in Tinley Park, returned to the market this month, and it was the second time the town home had to be relisted since it was put up for sale in March 2010. The first time around, a prospective buyer walked away from an offer, and the property was relisted. More recently, the town home came back on the market after a prospective buyer had not heard back from the bank in four months.

“The ones that get approved before 90 days, they do happen, but you have to have buyers locked into a worst-case scenario,” said Theresa Panzica, a Chicago lawyer who works with sellers and buyers in short sales. “The reason deals fall apart is because of buyers, not the banks. Banks are approving these things. (The issue is,) are the buyers going to wait?”

Expectations lowered: Low interest rates may be causing existing homeowners to call their mortgage bankers, but demand among homebuyers remains soft, and the lending industry’s trade group doesn’t see that changing next year.

The Mortgage Bankers Association estimates that mortgage originations in 2012 will total about $931 billion, the lowest volume since 1997 and a $30 billion drop from its previous estimate. This year, the trade group said, mortgage originations will reach $1.1 trillion, about $100 billion more than its earlier forecasts and largely because of refinancing demand.

From Housingwire.com

By: KERRI PANCHUK

Second-quarter pre-foreclosure sales jumped 19% from the previous quarter, suggesting more banks and distressed borrowers are searching for efficient ways to offload properties that are near foreclosure, RealtyTrac said.

Third parties acquired 102,407 pre-foreclosures in the second quarter, while 162,680 bank-owned homes were sold in the same period.

Pre-foreclosure sales are generally short sales and properties sold within the foreclosure process.

“The jump in pre-foreclosure sales volume coupled with bigger discounts on pre-foreclosures and a shorter average time to sell pre-foreclosures all point to a housing market that is starting to focus on more efficiently clearing distressed inventory through more streamlined short sales — at least in some areas,” said James Sacchio, CEO of RealtyTrac.

As for who is nabbing up distressed and bank-owned properties, RealtyTrac said third parties acquired 265,087 homes classified as in foreclosure or bank-owned in the second quarter. That is up 6% from the revised first quarter figure and down 11% from the second quarter of last year.

The average sales price for foreclosures or bank-owned properties hit $164,217 in 2Q, down less than one percent from 1Q and 5% from the second quarter of 2010.

The sales price for distressed real estate was 32% below the average sales price of homes not in foreclosure.

States with the largest quarterly increase in pre-foreclosure home sales included Nevada, which experienced a 43% increase; Washington (39%), California (38%); and Texas (34%).

The states with the highest number of foreclosure sales included Nevada, Arizona and California.

From CBS News

By Elaine Quijano

(CBS News)Anyone who remembers when mortgage rates were in double digits will appreciate this: The average rate for a 30-year-fixed mortgage fell today to 4.15 percent – the lowest in at least 40 years.

Despite the low mortgage rates, a lot of Americans are facing foreclosure. Some have found a way out, called a short sale.

Suzette Parris has spent her retirement savings trying to stay out of foreclosure.

“I actually expected to be here for a very long period of time,” Parris said, “but unfortunately, it didn’t work out that way.”

The taxes and fees on her condo in suburban New York went up, but her paycheck stayed the same.

Parris tried to have her loan modified “numerous” times but she says her mortgage company kept saying “No, no, no, no, no.”

“And then when I happened to fall behind, I fell behind one month, I called them, they said, ‘Oh sorry, we can’t help you.’”

She couldn’t find a buyer for her condo, so she turned to realtor Mark Boyland, a “short sale” specialist.

He told Quijano that in 2008 short sales represented about one percent of his business. “Last year it was about 36 percent of my business,” Boyland said. “This year it might surpass 60 to 70% of our business.”

In a short sale, a bank agrees to let a homeowner sell at a price that’s LESS than what’s owed on the mortgage. Homeowners avoid foreclosure; banks avoid being stuck with another foreclosed property.

But short sales are notorious for complications, like paperwork delays and banks pulling out of deals at the last minute.

“Initially the short sale system – if you could call it that – really wasn’t a system,” Boyland said. “It was broken. Each lender had their own process; each investor on the back end of each lender had their own guidelines. So it was kind of a mess there for a while.”

That mess only contributed to the glut of distressed properties in the real estate market.

So last year, as part of a push by the Obama administration to reduce foreclosures, the Treasury Department unveiled a program to simplify short sales for struggling homeowners. Banks must now respond to a short sale request within 45 days.

Homeowners are also eligible for $3,000 in aid to move.

Suzette Parris has already started packing as she waits for a short sale to come through.

She says she has a lot of mixed emotions. “But I think that because I’ve gone through it for so long, I’m just at peace saying, ‘Listen, whatever we have to do to try to start over, that’s what I’m going to do.’”

By one estimate, short sales could prevent another 275,000 foreclosures this year.

From Housingwire.com

By: Jon Prior

Mortgage servicers contending with attorney general investigations and extended foreclosure delays turned more to short sales in the past year.

In August 2009, short sales accounted for 8% of all liquidations of distressed properties. That number grew to 25% by the middle of 2011, according to research from Moody’s Investors Service.

Meanwhile, the time it took from a borrower default to eventual REO liquidation grew from an average 14 months in early 2009 to 24 months by the summer of 2011.

The delays pushed the timelines out and as a result, losses on the eventual sale of those properties higher. Servicers had to halt the foreclosure process in October 2010 to correct forged documents and mishandled foreclosures as part of the robo-signing scandal. Since then, new regulations from federal agencies and still ongoing negotiations between the state AGs left servicers turning toward an early sale of the property before a filing a foreclosure.

“To reduce their expenses and mitigate the high loss severity on liquidated loans, servicers are increasingly opting to bypass the foreclosure process and liquidate properties more quickly through a short sale,” Moody’s analysts said.

Researchers at Deutsche Bank said servicers are using the transactions to also cut into the shadow inventory of properties stuck somewhere in the foreclosure process. Standard & Poor’s said the market actually cut into the shadow inventory during the second quarter for the first time since 2009.

Deutsche Bank found short sales actually take less time to complete than REO sales because of the documentation problems.

The average REO took 17 months to sell in the middle of 2011, compared to just under 12 months for short sales completed in that time, according to Deutsche Bank.

Loss severities dropped as well. Servicers experienced a 70% loss rate on REOs sold in the middle of 2011, compared to less than 60% for short sales.

These transactions also do less damage to a borrower’s credit score, dropping it between 50 and 200 points compared to an REO sale, which can slash the FICO score for the borrower as much as 400 points.

Borrowers who manage a short sale can buy a new home between one and two years as well, according to researchers. Those whose homes sell through REO must wait between five and seven.

However, short sales continue to be a struggle as investors often squabble over whether or not to approve the transaction.

“Short sales, like other servicer loss mitigation strategies, may stir a fierce ‘class warfare’ between investors in different parts of the deal capital structure,” Deutsche Bank researchers said.

Moody’s analysts said short sales steadied loss severities over the past year, as foreclosure problems continue to plague the recovery.

“We can attribute the stabilization of average loss severities in part to a rising number of liquidations through short sale, which by reducing liquidation timelines, foreclosure expenses, and legal costs, can reduce the losses incurred on defaulted loans,” Moody’s said.

What’s a homeowner in distress looking for in an agent? Someone they have confidence in. What are you looking for in a short sale? The highest probability that it will close.

You can increase your listings by showing the seller online how they’ll access their file through the short sale process. Then bring a pre-printed package on their bank’s letterhead with all the information already filled out. This will show them you know what you’re doing and builds their confidence that you’re the right person to help them.

Now you’ve got them interested, it’s time you take a close look to see if you’re interested…

SHORT SALE TIP #1: Top short sale agents DO NOT take every short sale that comes along.Many agents fall into this trap because they really need the listing. THIS IS A MISTAKE.If you’re going to spend 10-20 hours on the average short sale, you need to be picky as to what you take.This may mean you need to increase your marketing to sellers so you have more potential listings to choose from.

Sellers to watch out for:

1. Sellers that feel ‘entitled’: “I just put $20,000 into my basement. I just want that back and nothing more.”
2. Sellers with unreasonable expectations: “I won’t bring a penny to closing and I must have all the debt waived”
3. Sellers that are completely apathetic- they could file bankruptcy or not cooperate: “If YOU want to do the short sale, then I don’t really care.”
4. Sellers that aren’t on the same page: “My wife wants to stay in the house, but I want to move!”

Just put the above 4 items on your internal radar and have the confidence to either walk away or talk with the seller about the issue before you both move forward. Ideally, you’re looking for a seller that thanks you for trying to help them out of a huge financial problem, and they’ll do whatever you ask to help get it done.This is saving you time that you could spend on other deals.Keep in mind, that these are just items to watch out for. Just because a seller falls into one of the above categories, doesn’t mean you shouldn’t take the listing.Just weigh all the pros and cons and decide for yourself.

Now it’s time to make sure you actually get the listing.If you have a laptop or iPad, you can show them how they’ll login to their Short Sale Commander/Guest Access account.Having them just see that you already have a ’short sale system’ will usually close the listing for you and it helps build their confidence in you.Then you can print their pre-populated lender forms right from Short Sale Commander’s Auto-Forms tab.All of their information is professionally filled out for them – so they’ll sign it quickly and get it back to you.

SHORT SALE TIP #2: Submitting the short sale package to the bank on the banks own forms helps it get through the red-tape process faster!

The solution to all of these issues is all about a proven system! If you’re not already a Short Sale Commander user,  then watch our eye-opening video to see how easy it is to get started.

Try our free, full-featured 14 Day Free Trial, this includes full support and training on how to optimize your short sale business.

From Housingwire.com

By: Jon Prior

Servicers completed 10,438 short sales through the government’s Home Affordable Foreclosure Alternatives program since it launched in April 2010, according to the Treasury Department.

HAFA was designed to provide an incentive to servicers for completing short sales and deeds-in-lieu of foreclosure for loans that fail out of the larger Home Affordable Modification Program. Through June, servicers started 21,412 short sales and DILs, up 20% from the month before. A total of 10,754 were completed, up 25%.

JPMorgan Chase (JPM: 34.06 0.00%) is the programs leading performer, completing nearly 3,600 through the program, including nearly 1,000 in June alone.

Wells Fargo (WFC: 22.93 0.00%) was second, completing more than 3,100 since the program launched and roughly 700 in June.

Bank of America (BAC: 6.51 0.00%) completed 1,873 HAFA transactions, an increase of roughly 200 in the month.

Pam Marron, a senior loan officer with Gold Start Mortgage Financial Group in Tampa Bay, Fla., said more and more homeowners in negative equity view a short sale as their only way out. Many, she said, are defaulting because banks require them to do so in order to qualify for a short sale.

“The growing problem in Florida is the alarming increase in the number of short sale listings that are coming onto the market. These people are still employed but severely underwater and are having to short sale because they are not able to pay the vast difference owed between the mortgage amount and the value of these homes,” Marron said. “Banks are requiring homeowners to default in order to qualify for the short sale.”

In 22% of the HAFA agreements started — equal to roughly 4,700 mortgages — the homeowner began a HAMP trial but later requested a HAFA agreement or was disqualified from HAMP.

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.