Weak Leadership

Being a businessman I seldom delve into politics in this platform, but it is clear to me that part of the problem in affecting a sustainable recovery is a lack of political will in our current leadership, including the White House, after reading this gem in the Times on the foreclosure fraud crisis:

the Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy.

So we’ll just spook the borrowers, who are already hammered and traumatized. Protect the banks. Look, I am a brazen capitalist and this is insanity. Insanity! And both parties are culpable.

In our local elections, state Senator Suzi Oppenheimer has been devoting the bulk of her campaign to going negative on challenger Bob Cohen, accusing him of being a slumlord, among other things. Cohen, who apparently owns  a number of buildings in the Bronx, is having tenant complaints and other dirty laundry aired by Ms. Oppenheimer in her bid for re election. This skirts the real issues. Cohen, a real estate guy, for all his blemishes might actually have more insight into our problems than the Senator, who has been in Albany since 1985. This is not an endorsement. It is conjecture. But neither candidate is addressing the issues facing the electorate while we discuss the man’s apartment buildings.

Late last night, in a post entitled Short Sales are the Answer, I said the following:

It is a shame that there is no political will on either side of the isle to hold lenders feet to the fire to affect meaningful change, and defaulted homeowners must contend with a mad race to work a miracle with an uncaring, unresponsive monolithic entity before that monster forecloses, repossesses their home, wrecks their credit and crushes their dreams. This is not progress.

In reading this morning’s NY Times on the White Houses sheepishness (Hey Mr, Obama, can you pretend that Bank of America is General Motors?) and reflecting on Ms. Oppenheimer’s electioneering in lieu of addressing her constituents’ pain, my words are all too sadly true. Forget Washington for a moment. This is Westchester County’s state senate seat. This is our representative in Albany.

Show me someone up for election with the guts to stand up to lender’s unwillingness to change their architecture against short sales, which are a huge part of the solution, and G.O.P., Democrat or Martian, they’ll have my vote.

Foreclosure Moratorium Will Boost New York Short Sales

Now that Bank of America has joined Chase and GMAC in suspending foreclosures in 23 states (BoA is actually suspending them in all 50), including New York, the entire industry is abuzz with questions as to what the consequences are for the market, a recovery, and most of all, distressed homeowners. Now known as the robo-signing scandal, the issue is calling into question the legitimacy of thousands of foreclosures.

What’s more, with foreclosures halted, what will banks do to dispense with default properties and non-performing loans? The answer to my mind is clear: start paving the way for more short sales. Title is passed from one owner to the next with no interruptions or questions, the process saves the banks both time and money, and more borrowers can move on with their lives with dignity which is all to often a missing element of the current system.

The advantages are enormous:

• In a short sale, the bank doesn’t have to take 1-2 years to repossess the home. They get their money faster.
• In a short sale, there are no legal fees associated with a foreclosure.
• In a short sale, the bank does not have to manage the property, put the utilities in their name, or winterize the property except in rare cases.
• Short sales are seldom boarded up, vandalized, or vacant. They therefore net the lender more money.

This has always been the case, and made me wonder why banks are so difficult, but with foreclosures off the table short sales now appear to be their only option.  With New York among the states that more lenders are suspending foreclosures, this gives distressed sellers breathing room, and, more importantly to my thinking, dignity.

Who Pays the Commission in a Short Sale?

When a question is asked of me more than once it is a good bet that it is a common one, so I’ll post briefly today on who pays the commission in short sale. The answer is simple: The lender pays the real estate commission.

In a regular sale, real estate commission is paid from the proceeds of the equity. In a short sale, sellers who cannot pay their mortgage and do not have the funds to cover a short fall cannot pay the commission, because there is no equity, no proceeds, and no outside resources. Therefore, as part of their loss, the mortgage company pays the real estate commission. They also wash away the past due payments, pay the back taxes, and anything else needed to pass the home to the new buyer with clear title.

No real estate broker should ever require a short sale client to deposit money in escrow, or take a fee in advance of an approved sale and closing. It is antithetical to the contingent nature of our business. The commission is an incentive to do your job, and I would be suspicious of anyone who asks for money up front.

Again, to be clear: In a short sale, the bank pays the commission. I have closed short sales in Yonkers to Suffern, Chappaqua to Poughkeepsie , and dozens of places in between. I have never taken a dime from sellers.  The bank has always paid the commission.

Yonkers Short Sale: Do You Need an Attorney? YES

Here’s one from the other side of the closing table, where I represented buyers on a 5-month odyssey to purchase a short sale in Yonkers. It made me appreciate the waiting game that buyers must endure, and how valuable status updates are to home purchasers of a short sale in order to stay engaged and committed to the purchase. Buyers need to be updated to, among other things, time their mortgage application, appraisal, and rate lock.

Note that I did not say anything about ordering title work. Title work in a short sale MUST be ordered by the seller’s attorney in the beginning to ensure there are no 3rd party liens that might scuttle the sale later on. 3rd party judgments and liens are common in default properties because when there is financial hardship, there are other bills than the mortgage that go unpaid.

The home my clients sought to purchase was perfect for them- a recent build on a dead end street with a good location for their commute to work. Things on the seller’s side were not organized from what I could see, until I made substantive contact with the seller’s attorney, who entered negotiations later in the game when a private 3rd party hired to negotiate the short sale was sacked mid-process. I can’t judge their circumstances, only the scenery from our point of view. From contract signing in May until August, everything seemed to be in limbo.

In early August, the seller’s attorney spearheaded negotiations. The short sale was approved in late September with terms the seller could live with. We closed September 29, which was a nice anniversary gift. His communication with me was crucial to my buyer clients’ management of their mortgage financing. When they were ready, we were ready. No delays, no snafus, minimal drama.

This was a unique file in that I had a direct line of communication with the seller’s attorney, which brokers seldom have. Typically, I would deal with a listing agent, but that agent would be the conduit to their attorney. But the bottom line here is that the attorney’s involvement was indispensable, and the communication with our side affected a successful outcome. New York is different from many states where an attorney is not part of the process. But in New York, Connecticut, and New Jersey, it is clear to me through experience that without an attorney closely involved in the short sale, the closing may not succeed.

Peekskill Short Sale: Lessons to Learn

We recently closed on the short sale in Peekskill, NY and it was rather unique. For one, the seller, a licensed professional, had to come up with some money at the closing due to being lighter in the hardship department. We warned the client of this possibility, but the way the bank went about it is indicative of why we have the problems we have in this economy. In addition to that, the buyer almost couldn’t close because of a discrepancy on the taxes.

The seller had relocated out of state and was renting the home. He moved to an area of the country with a lower salary scale, and was now teaching in his field rather than in practice. He therefore could not write a check for 6 figures to make the lender whole. There was some acrimony with the lender as to the value of the home; as  is often the case, the lender broker price opinion was done by an out of area licensee with no clue on the local market, and their “value” came in at a  price point where we once were, and could not get anyone to even come look. Bad BPOs are a problem that could easily be solved by using local brokers and appraisers. Why lenders do not grasp this is beyond me.

Meanwhile, the buyer’s purchase appraisal came in too low! Their bank was reticent to loan that much on the home, and there was another problem with a re assessment raising our published tax figure. Evidently, both my and the buyer agent’s verification of taxes came prior to the bill going up. Their appraiser caught the discrepancy. This temporarily put the kabosh on the buyer’s mortgage.

As with many short sales, it was our job to go to the mat with the lender to get the deal done, which we did. The seller had to write a small percentage of the shortfall at closing to avoid any long term deficiency, which he had and did.

Lessons learned:

• Re-verify taxes when homes are listed on or near reassessment dates.
• For the banks: stop using out of market brokers for price opinions. The same goes for out of market appraisers.

I give credit to our proactive seller for helping himself and remaining in strong communication. I am more leery than ever as to the wisdom of those people at the lenders, whose myopia about local knowledge for BPOs contributes to muddying up the short sale process and causing more stress and angst. I am sure this is part of the issue with recent moratoriums on foreclosures– the banks are getting unforgivably sloppy.

Ossining Short Sale: Undramatic

As short sales become more prevalent in Westchester County, the anxiety around their newness tends to fade. With familiarity comes some confidence. We just closed on one such sale. The sellers were being transferred out of state after buying the house in 2006, right after the peak. They bought with a smaller downpayment, so when the market crashed they joined millions of other Americans (and thousands of fellow Westchester County homeowners) in being under water.

Being upside down is not necessarily a problem unless you have to sell. Well, when you get transferred, you typically have to sell. In going over our options, it was clear that they could not rent the home out and remain in the black, and there was no savings. Their housing expense in their new home would not enable them to carry two homes, so the house in Ossining couldn’t be kept. A short sale would be their best option. Wisely, they consulted with their attorney as part of the decision.

After listing the house they made one price adjustment, an offer came in, we went to contract, submitted everything to the lender, and it was accepted. No problems with the appraisal on either side, no issues with the new buyer, the buyer agent did her job, and we closed. The only drama was how a boat left in the driveway would be dispensed with. The seller’s relatives removed it.

It was that simple.

It took a little over 4 months for the short sale to be approved. I have to give credit to my clients for doing everything they needed to do, and to the buyers for having their act together when the approval came through. There was no drama and no suffering because everyone did their job and kept focus.

Stress: The Worst Part of a Short Sale

I have listed two new short sale homes this weekend. One is just shy of $1 million, the other is around $200,000. One is in lower Westchester County, the other is in central Dutchess County. One is almost 3000 square feet, the other is closer to 1300 square feet. Although it doesn’t sound likely, the two clients have a great deal in common.

• Both are responsible and hard working
• Both are frugal and fiscally conservative in their management of money
• Both are college educated professionals
• Neither fits the profile of an irresponsible foreclosure candidate
• Both are mortified at their situation, feel alone, and under considerable stress.

What is different about many short sales in the current market is that due to job loss, loss of income, or something else completely not related to their responsible behavior, otherwise good and accountable people are finding themselves needing to sell and not having the equity to cover their costs. These were not sub prime borrowers. They are stable. One had his business fail due to the recession, and the other has lost income. This is unfamiliar territory for both, because they have always watched their Ps and Qs and never overextended their credit.

In both cases, I have let them know that they are not alone, and that they are actually smart for getting proactive and contacting me. In both cases, I will get them out from under their upside down mortgage and get their short sale approved. They will not owe the lender anything after they close. They will get a fresh start. I will keep a roof over their head and help them repair their credit over time. In 2 years after they sell, if they want, I’ll help them buy another house.

The money is not the worst part of a short sale. No one starves or has no clothes. The worst part is the stress. Address the stress or find someone to help, and you’ll be lucid enough to help yourself. That goes for Scarsdale. And Chappaqua. And Yonkers. And New Rochelle. Everywhere.

Dutchess County Short Sale: Old School Guy from the Bronx

Earlier this month we closed on a short sale that was another marathon. I listed it in April of 2009 and got an offer that August. It went under contract in early September and everything looked like a relatively smooth deal until about a month into the contract period we still did not have a negotiator assigned to our case. I always warn short sale clients that we might be in for a wait, so we were all on the same page.

My client was a very nice man- a widower, originally from the Bronx, and had the house decorated “bachelor style” in his own words, and I knew what he meant. His other half had departed this earth, and he couldn’t handle the house alone.

By the time the autumn rolled around, we finally started to get some communication from the lender. They moved slow as molasses, and the buyers were getting understandably restless. These were cash buyers; we wanted to keep them and avoid the uncertainty of waiting out a loan approval once we had the short sale finalized. However, as autumn gave way to the holidays and Winter, it was clear that the bank did not share our zeal to put this transaction to bed.

A title issue was discovered in March when we thought that this was going forward, and at that point the buyers asked for their money back. Deadlines had long since passed, and we had no contractual enforcement to keep them in the transaction. It took until May to clear up the title issue, thanks in so small part to my clients’ hard work to produce needed documentation (clearly, his late wife was the organized one in that partnership, by his own admission).

I had remained in touch with the buyer agent and our attorney kept the lines of communication open with the buyer’s attorney. When we informed them that the issues were cleared and the bank was ready to close, they elected to return to the table. On July 12, 13 months after I listed the home, we closed. We successfully held off foreclosure action from the bank for over a year, the seller had a fresh start with no liability or debt after the closing, and he left the house with dignity. He deserved it- he was a good guy and a team player, and if he was stressed, he dealt with it very well.

Short sales are seldom this long a process, but even if they aren’t, a good short sale broker will help stop foreclosure action on the client’s house and keep negotiating with the lender until we get to “yes.” Moreover, it took some real teamwork to clear the title issues and get our client to the table. To his credit, he was very cooperative, and that is all you can ask for from a client selling his home in a short sale. Except maybe tidy up a little!

NY Times Discovers Short Sales 14 Months After They Arrived in New York City

With their article entitled The Roller Coaster Ride Called a Short Sale, the NY Times has examined the phenomenon’s arrival in Manhattan. Of course, I posted Short Sales Have Come to New York City in March of 2009. That is when I referred one of the first ever in Manhattan to my esteemed colleague, Eileen Hsu of Prudential Douglas Elliman. Eileen brokered the deal very well and it closed successfully, which came as no surprise because she is a fantastic agent. It doesn’t surprise me that the short sale is now in the news. The thing is, it isn’t new news. Eileen and I know that very well.

Strategic Defaults in Westchester County

Wikipedia defines the term Strategic Default as

“the decision by a borrower to stop making payments (i.e. default) on a debt despite having the financial ability to make the payments.” (my emphasis added)

Given the huge amount of attention given to the practice, I thought that I would offer my own observations on what I am seeing in Westchester County. Given our proximity, I think the commentary holds true for other parts of the New York Metropolitan area, including Rockland, Fairfield and Long Island.

Simply put, I don’t see many people consciously deciding to walk from mortgages that they could otherwiseWoof pay in this area. While it may be said that a short sale Realtor like myself would not be approached by someone considering a strategic default, I would argue to the contrary- the very definition of “strategic” would indicate that some thought and research would go into the mix before deciding to default. I have spoken with people who are considering it; there are just aren’t as many here as in other areas. I think the reason lies primarily in the characteristics of our marketplace, and the fact that you have to live somewhere, and this isn’t the easiest place to change where you live.

Here are a few reasons I think strategic defaults are not as prevelant in Westchester as they might be elsewhere:

• We don’t have the options other markets have. In places like the Sunbelt, which have been hit very hard, I can see why it would be tempting to move into a similar house right in your own subdivision and cut your payment in half. We just don’t have those subdivisions with dozens of available options. Westchester has been a mature county for decades, and there are no vast new subdivisions with lots of available inventory to be had. The options might not allow their children to remain in the same school, or that one identical house might be a mothball smelling geriatric special with a 1975 kitchen and baths. And if there is a tempting option at an attractive price, there might be competition, shrinking the financial advantage in moving.
• The economy of scale is bigger than other places. Take a homeowner in an area like Eastchester or Yorktown who paid $600,000 for their home in 2006 and is now only worth $485,000 with a balance of $525,000. They are indeed underwater, but there isn’t much of a step forward in renting or buying a similar house for $485,000. In the case of buying, they’d still to come up with a downpayment and closing costs, which, even for an FHA loan, could be $40,000-$50,000. Remember, just the tax escrow on a home here would be $10,000 before you paid a dime in closing costs. There may be some who rent, but maintaining status quo in quality of life in that case, especially in light of losing the tax advantages, is dubious. I would argue that anyone who takes this option isn’t being strategic, but has their hand forced due to financial hardship.
• The downturn hasn’t been as big here. Oh, it’s been big alright, and in dollar value perhaps even larger than most, but in terms of percentages, we’ve only lost 20-25% of value, half of the percent of the harder hit regions. The climb back, therefore, isn’t as steep. So if the choice on the table were to lower your mortgage payment from $4300 to $3800, come up with $50,000 and wreck your credit, I think most people would decide to stay put. Elsewhere, where the option is a far smaller payment and much less cash of an upfront cash outlay, the credit consequence might not seem as high a price to pay.

So who is strategically defaulting in Westchester? I think that most of the strategic defaults in Westchester are on non-owner occupant properties where the rent no longer covers the payments and the monthly shortfall is not worth it to the owner. Rather than subsidizing a property awash in red ink, they let it go and keep the money in their pockets.

However, from my non-scientific, real estate broker vantage, by far, the bulk of defaults in Westchester are not strategic, but due to real hardship. In a county where the median price peaked at over $700,000, an interruption in employment or loss of income can get you pretty behind in hurry, and the numbers might be too enormous to catch up for most. That discussion will be forthcoming.

Originally posted at: J. Philip’s Westchester Real Estate Blog: Are Strategic Defaults a Problem in Westchester County?

What Qualifies as Hardship in a Short Sale?

What qualifies as hardship in a short sale? I get this question fairly often, and it should be addressed. First, I’ll tell you what does not qualify as hardship, and that is simply being underwater. If you owe more than you are worth, being upside down alone is not adequate hardship to get a short sale approved. That is only half the equation. There has to be a financial hardship.

In every case of hardship I have ever seen, a loss of income has been involved. It could be unemployment, divorce, being laid off, the failure of a business, or any of a hundred other things, but a loss or decrease of income is absolutely hardship. When your expenses remain the same and your income goes down or disappears, you have a case for hardship. You could be a ditch digger paying a $500 per month mortgage or a brain surgeon paying $10,000 per month. If you lose income, hardship is not hard to prove. In rare cases, income has remained the same but the payment has adjusted up, but the mathematical outcome, namely a deficit, is the same.

That is as basic a yardstick as I can find. I’d be surprised to find a more common or less complicated theme.

Loss of income is almost always a case for hardship.

Originally posted at Westchester Real Estate Blog

Dealing with Second Mortgages in a Short Sale

New HAFA rules are forcing home sellers to negotiate directly with subordinate liens, or, in common terms, second mortgages, on their own, according to Bankrate.com. The way the rules are written, there is a financial incentive for the 2nd mortgage  to settle and release the lien, but the onus of getting assurances that the bank will settle rests on the borrower, which seems incongruous with the intent of the law. If the law is that the bank gets $3,000 from the government to settle, then it is the government who should be getting written assurances that they will indeed settle, not the borrower. The article points out that distressed sellers are already bleaguered and beaten up and in no condition to play hardball with another bank.

I agree. Distressed home sellers ought not do this on their own. They need an advocate, and a 3rd party with experience is very likely going to get a better result than a beaten up home owner. This is what we do, but rather than make this post a commercial I’ll also add that here in New York, the attorney should be on the front lines dealing with the 2nd mortgage as well as the first. The attorneys that we have on our team are excellent; the sellers can rest assured that the arrangements they help negotiate are the very best that can be agreed to. They also read the “fine print” with a fine tooth comb. The devil is in the details in these things, especially in New York.

All short sale agreements from lenders should be in writing, and all short sale agreements from lender should specify that they will not go after the borrower for the difference after closing. Anyone can get a short sale with no assurances of financial security after the closing. It takes a professional to ensure that the seller’s obligations in a short sale end at closing with no residual debt. That is our job, and that is how we do our short sales.

Doing a short sale on your own invites peril. We have done dozens, and that puts you in good hands compared to the guy in the mirror.

The Wall Street Journal Agrees with Me on Short Sales

Amy Hoak’s timely article on HAFA and short sales in yesterday’s Journal concludes with timely advice that I wrote myself the very same day. The article focuses on the many pitfalls of short sales, as well as the new HAFA (Home Affordable Foreclosure Alternatives) regulations which are set to go into effect on April 5, 2010.

Here is what I wrote yesterday:

Yet people still do not ask their prospective agents how many short sales they have closed. You simply cannot be a specialist with no experience; I’m sorry. I don’t care if you have a PhD or a photo shaking the Pope’s hand. What they taught you in class simply isn’t all it takes to handle the loss mitigation department of a lender. Sellers need to understand that if they hire an inexperienced agent to do their short sale, they do so at their own peril. I’d never want a surgeon cutting their teeth on my gall bladder, a lawyer apprenticing at the expense of my freedom, or an agent getting their feet wet at the expense of my finances.

Simply ask : “How many short sales have you successfully closed?” prior to listing your home. That will guide you far better than a patch on their arm.

Sellers at the conclusion of the Journal article are advised much the same thing: to ask their prospective agent how many short sales they have successfully completed, and how many were lost to foreclosure.

Obviously, the word is getting out. Experience trumps marketing when your financial life is at stake.

What Makes a Short Sale Specialist?

When I closed my first short sale in 1998 I had no idea that 10 years later I’d be doing them with any regularity. At that time, short sales were uncommon; they remained uncommon through 2006. Even in 2007, other agents needed to be educated about what a short sale was, how long it took to close, and what process the negotiation would entail.

Having closed dozens of short sales in the period since 2007 in Westchester and the surrounding counties, I now see a larger number of agents who are familiar with short sales. I also see a higher number of agents who bills themselves as “short sale specialists.” In some cases, they have earned a designation. I applaud any agent who furthers their knowledge. However, designations can be misleading and may not help the client.

There is only one problem with an agent who calls them self a specialist these days, and that is this: they may not really be specialists. Designations mean nothing if you cannot successfully negotiate and close a workout. In Westchester, there are enormous numbers involved, and if a home seller cannot close on their short sale because their agent, well, stunk, they could be stuck with a lingering debt, or, worse, a deficiency judgment for tens of thousands of dollars. What’s worse, if these sellers really knew how many short sales their “specialist” agent actually closed (often, between zero and one) they would be mortified.

The code of ethics strictly prohibits misleading clients as to the agent’s scope of expertise. A special designation might circumvent an outright violation. But it doesn’t protect a Westchester homeowner from huge problems if their agent can’t get the job done. In many cases, the homeowner never asked the agent how many short sales they have actually closed. This is madness. I would never have eye surgery with a rookie doctor. Our obstetricians had decades of experience. The same goes for the guy that installed our pool table, water heater, and appliances. The reasons are obvious.

Yet people still do not ask their prospective agents how many short sales they have closed. You simply cannot be a specialist with no experience; I’m sorry. I don’t care if you have a PhD or a photo shaking the Pope’s hand. What they taught you in class simply isn’t all it takes to handle the loss mitigation department of a lender. Sellers need to understand that if they hire an inexperienced agent to do their short sale, they do so at their own peril. I’d never want a surgeon cutting their teeth on my gall bladder, a lawyer apprenticing at the expense of my freedom, or an agent getting their feet wet at the expense of my finances.

Simply ask : “How many short sales have you successfully closed?” prior to listing your home. That will guide you far better than a patch on their arm. And if you are an agent who wants to get into short sales, work for someone who does them with regularity. I have often said that any agent can make money in short sales. However, 99% of them should be via a referral to a true specialist.

New Federal Short Sale Program Starts April 5

The NY Times is reporting on a new Obama initiative to create a financial incentive for banks and home sellers alike to do short sales. A few highlights from the article:

Program starts April 5, 2010

Lenders will be “compelled” to accept short sales. We’ll see about that.

The administration wants to streamline the process. We’ll see about that too.

Financial incentives are $1,500 to the home seller, $1,000 to the lender, and $1,000 to a subordinate lender.

Agents will be used to valuate the properties, but lenders will not be forced to accept offers beneath the agent valuation.

Continued at Westchester Real Estate Blog.

Short Sale Fraud: By Banks!

CNBC is reporting that some banks are being accused of, of all things, bank fraud in short sales. Those of us who sell short sales know that the hardest cases are often the ones with subordinate financing, or in layman’s terms, a second mortgage. If you owe $500,000 on a house with a $425,000 1st loan and a $75,000 second mortgage, then a short sale for $400,000 cleans the 2nd loan out completely. If they are lucky, they will get $3000 from the first lender. They have little choice- if the house goes to foreclosure, they get nothing.

ON some files, the 2nd mortgage will try and negotiate an unsecured amount to be paid back by the borrower after the closing in exchange for release of the lien. That is their prerogative. It is, after all, money they are owed.

The fraud part comes when the 2nd lien wants cash paid to them that is not disclosed to the first mortgage holder. In other words, a “side deal” cash payment delivered at closing that is undocumented and not disclosed on the HUD-1 settlement statement.

So instead of Tony Soprano conspiring to defraud the first bank, it is the second bank. Has it happened? I’d say yes. Is it widespread? Hard to tell, probably not, but once is too many times. Does this surprise me? No. These are the institutions that screwed everything up to begin with. Nothing they do surprises me.

Government: We Want 10 Day Short Sales

There is a new US treasury guideline that will, according to a report, mandate that banks make their decision on a short sale in 10 days. The new rule also proposes a $1500 allowance to the seller for moving expenses. I have said before that it shouldn’t take a lender more time to decide on a short sale than it currently takes to underwrite a mortgage. The process is virtually the same.

As enticing as 10 days sounds, I don’t see how it could be enforced, nor do I see 10 days as particularly realistic. It takes a week for example, to get an appraisal done. The pendulum does not need to swing so far the either way from 4 and 6 month short sales to under 2 weeks. I’d be happy with 30 days, and, frankly, so would the buyers. The banks are overwhelmed as it is, and they don’t have the staffing (or so they claim) to speed things up.

So how will they do it? Will this help or hurt? My fear is that, pressed to make a decision, the lenders will issue denials on deals they might otherwise approve if given a reasonable amount of time.

Will Banks Finally Speed Up Short Sales?

There is some debate. I don’t think they will, for a variety of reasons, not the least of which is that they probably fear that if they make them easier, more people will try for one. Since the other side of the deterrent is foreclosure, and since loan modifications aren’t exactly saving the economy, status quo has at least enabled them to repay their TARP money, so why should they change now?

Bottom line: If you need to do a short sale, you still need an expert with experience, and not some guy who attended a seminar once.

Bad Blood Toward Bank of America

Russell Shaw passes on a powerful email being sent to agents on how to deal with Bank of America’s difficulty with short sales- don’t send them any new mortgage business.

More thoughts here.

Short Sale Investor Canard

Given the number of blogs on the difficulties agents experience on short sales, I thought I’d take another shot at a canard that banks are now using to justify more delays, and that is the following:

“The investor is reviewing the file.”

This is typically followed by 60 days of nothing.

Now, I don’t argue that the investor is reviewing the file, I simply question the wisdom of the investor reviewing one file at a time.

Let’s go back to mortgage 101: when a mortgage application is underwritten, it is reviewed by an underwriter to ensure that it conforms to the standards of the investor, which for example, could be Fannie Mae or Freddie Mac. Fannie and Freddie then buy these loans by the thousands in bundles. If Fannie Mae and Freddie Mac manually reviewed every new mortgage application one at a time we’d just be getting around to closing all the contracts written in 2007. It is utterly absurd for them to do so. Commerce would cease.

Continued