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“Are you a real estate licensee working short sales?” If the answer is yes, you are working with Bank of America! What you need to know: The Fannie Mae site includes an informative publication titled “Know Your Options.” Take a moment to review the options referenced, in particular I call your attention to the Deed For Lease Program. This may be a viable option for homeowners who can no longer afford the payments and maintenance expenses but wish to remain in their home as tenants.
Bank of America has launched a website containing extremely valuable information detailing their short sale process and programs. One such program is the Cooperative Short Sale Program, launched in March of 2011. Everything you’ll want to learn about the program resides in Bank of America’s website. Take advantage of the rich content by logging on to: www.bankofamerica.com/realestateagent Whether you are a consumer or a real estate practitioner – “knowledge is power, so power up.” No doubt about it! We are on an information highway – with traffic heading our way at a frenetic rate of speed! Keeping up is challenging but resources are available! One example is the website referenced above. Other useful sites include: www.fanniemae.com and www.freddiemac.com |
A Short Sale Tip From Kathy
FHA Loan Limits Restored! Great News for the Housing Market
| Just in case you didn’t know, Congress has restored the loan limits for the Federal Housing Administration (FHA) for two additional years. The National Association of Realtors (NAR) and its ONE MILLION members worked tirelessly to achieve this result. This move by Congress will pave the way for qualified homebuyers to stay in game!
As you may know, in late September the FHA, Fannie Mae; and Freddie Mac loan limits were reduced in 42 states pricing potential homebuyers out of the American Dream of home ownership and holding back the housing recovery. NAR immediately went to work with the goal to get the loan limits restored in Congress. For weeks that goal seemed unlikely. The REALTOR® community as a while also went to work and educated Congress making it clear to them that well-qualified buyers didn’t need yet another hurdle to access affordable mortgage financing. Congress finally listened because we were persistent and because we were right! The reinstated FHA loan limit formula and cap change will help make mortgages more affordable and accessible for hard-working, middle-class families in 669 counties in 42 states and territories, where the average loan limit reduction after the reset last month was more than $68,000. The provision reinstates the FHA loan limits through 2013 at 125 percent of local area median home prices, up to a maximum of $729,750 in the highest cost markets; the floor will remain at $271,050. However, Congress chose not to apply the loan limits restoration to Fannie Mae and Freddie Mac. Fannie-and-Freddie-backed mortgages will remain at 115 percent of local area median home prices up to $625,500. The bill also provides for a short-term extension of National Flood Insurance Program through December 16, 2011 and NAR will continue to press Congress to use the additional time to complete their work on a five-year reauthorization of the program, which ensures access to affordable flood insurance for millions of home and business owners across the country.
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Important Short Sale News for Realtors, Buyers, Sellers and Escrow/Title facilitators
On November 18, 2011, at the request of NAR and the American Land Title Association (ALTA), Freddie Mac amended its policy regarding its mandatory short sale affidavits.
The purpose of the affidavits is to prevent fraud by requiring the buyer, the seller, the real estate brokers, the escrow/closing agent, and any transaction facilitator to make various certifications (including that the short sale is an arm’s length transaction and the buyer will not resell within 120 days unless there are substantial improvements).
Servicers are required to implement the changes by January 1, 2012, but are encouraged to do so immediately. Each servicer covered by the policy must update its forms to comply with the revised policy.
Realtors® are encouraged to make sure they are signing an updated form and, if presented with an old form, are well-advised to request the servicer to update or allow amendments to the form before they sign, to avoid potential liability issues.
The key changes are identified below:
- The certification is made based on “the best of each signatory’s knowledge and belief.” Freddie has retained the statement that a signatory making “a negligent or intentional misrepresentation” agrees to indemnify the servicer and Freddie Mac for losses. The addition of the knowledge standard significantly reduces this liability.
- Only a signatory who makes a negligent or intentional misrepresentation, based on the best of his or her knowledge and belief, is responsible for indemnifying the servicer and Freddie Mac for any loss. No signatory is responsible for the certification of any other signatory.
- Although Freddie Mac is requiring all signatories to sign one affidavit, the amended policy no longer allows the affidavit to be an addendum to the sales contract.
- Realtors® are advised not to sign a document implying they are parties to the sales contract.
Fraud prevention is important; don’t let your guard down and always question any practices that appear to offer results too good to be true!
Bank of America Launches Limited Time Offer For Short Sale Relocation Assistance!
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Short Sale Update
Bank of America increases borrower relocation assistance payments. The recent launch of this nationwide program offers many delinquent mortgage customers increased assistance with relocation expenses ranging from $2,500 to $30,000 once a “qualifying” short sale is completed.
To qualify for the enhanced relocation assistance payments under the new program, the seller must work proactively with the bank to obtain a preapproved sales price prior to submitting a purchase offer to the bank.
In order to be eligible for the end of 2012 must initiate the payment the short sale and close by Sept. 26, 2013. Qualifying short sales already started but not closed may be eligible for the relocation assistance.
Initially, the program will be offered on mortgages that are owned by Bank of America and some loans that they service for Non GSE investors (this excludes Fannie Mae and Freddie Mac).
Stay tuned for more details coming your way and frequently visit www.bankofamerica.com/realestateagent
More Short Sale News coming your way!
As you may know the Federal Housing Finance Agency (FHFA) has the role of Conservator to both Government Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac. As such the FHFA exerts power over the two GSE agencies. The FHFA has directed both Fannie Mae and Freddie Mac to develop enhanced strategies for facilitating Short Sales. Please review the Press Release below in order for you to familiarize yourself with these new Short Sale time-lines.
While the required changes will be not be effective until June, whether you are a homeowner considering a Short Sale or a real estate professional representing homeowners and buyers, it is helpful to be aware of all relevant industry news. Preparing for and anticipating change is a key element in making informed business decisions. Regardless of how overwhelming it may seem, we have to read, read and read more just to keep up with the frenetic pace of the market!
All indicators seem to point to “headway” in the Short Sale arena, these GSE changes along with National Mortgage Settlement may pave the way for increased communication, cooperation and accountability as we continue to navigate these complex and often turbulent transactions.
As Dr. Suess tells us: “The more that you read, the more things you will know. The more that you learn, the more places you’ll go.”
Fannie Mae and Freddie Mac to Streamline Short Sales to Help Borrowers and Communities New Timelines Take Effect in June
April 17, 2012
Washington, DC – The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to develop enhanced and aligned strategies for facilitating short sales, deeds-in-lieu and deeds-for-lease in order to help more homeowners avoid foreclosure. The effort will come in stages with the first taking place this June. The new, aligned timelines include the requirement that mortgage servicers review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer.
“FHFA and the Enterprises are committed to enhancing the short sales and deeds-in-lieu process as additional tools to prevent foreclosure, keep homes occupied and help maintain stable communities,” said FHFA Acting Director Edward J. DeMarco. “These timeline and borrower communication announcements set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”
With the alignment, servicers will be required to do the following:
- · review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer and a complete borrower response package;
- · provide weekly status updates to the borrower if the short sale offer is still under review after 30 calendar days;
- · make and communicate final decisions to the borrower within 60 calendar days of receipt of the offer and complete borrower response package
By the end of 2012, Fannie Mae and Freddie Mac will announce additional enhancements addressing borrower eligibility and evaluation, documentation simplification, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance.
Source: http://www.fhfa.gov/webfiles/23887/Short%20Sales%20release%20041712.pdf
Short Sale Fact and Fiction
Short sales are not going away anytime soon! Market statistical analysis
provides ample proof that they will be with us for the foreseeable future. One
thing is certain: They are complex transactions that require skill and
patience!
As a real estate professional our charge is to counsel and advise our clients
both competently and honestly. If a short sale is right for a particular
homeowner we must stand ready to provide professional representation in order to
do so we must first be able distinguish fact from fiction! The following
represents a sampling of common misunderstandings!
short sale should be referred to tax, financial and legal advisors in order to
determine whether or not a short sale is the best option for their particular
situation.
transaction; it’s not necessary to obtain specialized education regarding the
process and pitfalls. After all, how difficult can it be?
transaction is nothing like what we have come to refer to as a “standard sale”
or “equity sale.” Short sale transactions require patience, knowledge,
persistence, negotiation skills and great deal of planning and preparation. For
that reason you should develop the right skill-set and seek assistance when
necessary.
Realtors® alike. Scams and schemes abound, being able to recognize and reject
them is one of most important skills you want to develop. The best test for
most is demonstrated in an old and familiar saying: “If it sounds too good to be
true…….” Well you know the rest!
and beware of the Internet. Information is prolific but not always
accurate.
the borrower must be delinquent in their monthly mortgage payments.
are considering approval of a short sale request. While delinquency may be one
consideration there are many others:
may be in danger of imminent default
required
and verifiable hardship* such as:
loss of equity is not typically considered a hardship
advise a borrower to stop making payments on any indebtedness
lenders.
a fair and equitably priced short sale is a preferred method of mitigating loss
and hedging against declining values. The growing number of lender incentive
programs evidences this theory*.
borrowers to open their mail as there may be an invitation waiting for them!
Relocation incentive programs range from $2,500.00- $40,000.00
the borrower is ready to submit a ratified offer from a ready, willing and able
buyer.
years lenders have learned that starting the foreclosure prevention process
early can have positive results for all. There are many “time of listing”
programs available to borrowers seeking to avoid foreclosure. Contact the
lender at the time the borrower is considering listing the property to determine
what programs may be available. Often this practice leads to a pre-approved
“list” price and a preliminary review of the borrower’s eligibility and
hardship.
Do your research each and every time, even if you are working with the same
lender.
negotiating with the actual lender. In most cases the entity managing the short
sale or foreclosure process is a servicer acting on behalf of an investor. Every
investor has different guidelines and many loans are held by multiple investors
making the process evermore challenging. So you can understand why every
situation is different.
and aren’t worth the effort when they do! They take forever and the lender
always reduces the broker’s compensation.
often paying out the compensation rate as agreed seller and broker. On occasion
and in certain circumstances lenders will attempt to reduce the compensation,
like anything else in a short sale compensation is a negotiable item.
enormous satisfaction in a job well done and assisting a homeowner who hopes to
avoid a foreclosure. Preparation, patience, knowledge and professionalism are
your best friends when it comes to closing short sales. They do take time but
when you have a plan and system in place success can be yours!
difference? The homeowner’s credit is shot anyway.
licensee ought not give advice on legal, financial or tax consequences of a
short sale. One thing is certain, there are many factors that impact the
borrower’s credit standing; a short sale may have less of an effect than
foreclosure, however many elements come into play. Borrowers can log onto www.myfico.com to
learn more. Though nothing takes the place of a CPA or Attorney when it comes
to assessing these matters
short sale agreement from the lender cannot qualify to purchase a home for at
least 5-7 years.
loan program for qualified borrowers who have been current on their mortgage for
the twelve months immediately preceding the short sale and have not engaged in,
what is known as, a strategic short sale.
who have 20% down may obtain a Fannie Mae backed mortgage in 2-3 years after the
discharge of a short sale.
criteria.
a 1099C, which triggers ordinary income tax liability for the amount of debt
discharged.
after a discharge of debt. However, it is not the 1099C that triggers tax
liability. In some cases the Federal Mortgage Debt Relief Bill of 2007 provides
an exemption from tax liability.
(search for Mortgage Debt Relief Bill). It is important to note that this bill
sunsets December 31, 2012.
provision as the federal bill.
borrower remains personally liable for any deficiency realized as a result of
the short sale.
Anti-Deficiency Statute. 580e of the Civil Code of Procedures now states that
all lien holders are prohibited by law from demanding additional consideration
from the seller as a condition of a short sale AND further bars the lien
holder(s) from pursuing the borrower for any deficiency. A borrower may offer
to pay additional consideration to any lien holder as long as the short sale
lender is made aware of and provides written approval of any such
agreement.
exceptions; if a borrower commits fraud or waste in the course of the short sale
their protection is lost. Borrowers who are on the note and trust deed as a LLC
or Corporation are not protected.
importance they do represent common misconceptions that seem to float in the
atmosphere somewhat akin to “urban legend.”
Five things that your friendly burglar wants to tell you.
Protect yourself! And pay attention to what the law enforcements experts tell you! This post courtesy of the L.A.P.D.
1. The two things I hate most: loud dogs and nosy neighbors.
2. I’ll break a window to get in, even if it makes a little noise. If your neighbor hears one loud sound, he’ll stop what he’s doing and wait to hear it again. If he doesn’t hear it again, he’ll just go back to what he was doing. It’s human nature.
3. I’m not complaining, but why would you pay all that money for a fancy alarm system and leave your house without setting it?
4. I love looking in your windows. I’m looking for signs that you’re home, and for flat screen TVs or gaming systems I’d like. I’ll drive or walk through your neighborhood at night, before you close the blinds, just to pick my targets.
5. Avoid announcing your vacation on your Facebook page. It’s easier than you think to look up your address
Short Sale Tips for Realtors when working with Sellers and lender(s) / servicers
Because short sales continue to be a significant part of our market, today I
am sharing some additional tips regarding working with Sellers and the
Lender/Servicer.
While the tips below by no means address every nuance of these very complex
transactions they do provide guidance with respect to the process in general.
Knowledge is power – so power up!
Review borrower’s (seller) options and refer to tax, financial
and legal advisors
- “Know Your Options” – www.knowyouroptions.com
- Review C.A.R. Short Sale Addendum and C.A.R. Short Sale Advisory
- If the short sale option is selected by the seller be cognizant of
the fact that a short sale is settlement of debt - Agreement to a settle a debt is voluntary for both seller and
lender/investor
In most, if not all cases, some level of sustained hardship is
required
- Seller will be called upon to prove/verify any hardship
- Loss of equity in and of itself is not considered a hardship
- Lenders/servicers are “qualifying” the type of hardship therefore the
guidelines may vary- Strategic versus unavoidable
- Imminent default versus default
- Legitimate hardships may include
- Loss of employment
- Reduction of income
- Relocation
- Military deployment
- Death or illness
- View previous post titled: “What types of hardships might be acceptable to
a lender/ servicer?”
At the onset determine whether you are working with the Lender
(portfolio product) or a Servicer (Servicing the loan on behalf of an
investor)
- A single loan may involve multiple investors
- Requires additional time and patience
- Perform your due diligence sooner versus later
- Investors have guidelines
- There may be exceptions to guidelines
- Provide verifiable justification for any request for exceptions
- The servicer may have delegated authority to settle but it varies investor
to investor- Full authority
- Limited authority
- Typically a portfolio loan can be negotiated more swiftly
- A serviced loan flows through more channels thus the process is more complex
Start the process early
- Engage all lien holders at the onset
- Do not wait for default or notice of sale
- Incentive programs for homeowner(s)
- Encourage sellers to open their mail
- Some short sale incentives have expiration dates
- Willingness to establish “time of listing” pricing
- Talk to the lenders about special programs
- Ask about allowable allocations to junior lien holder(s)
- Other liens or obligations
- Determine whether or not the loan is scheduled for service release
disposition if possible- Note: Be sure to ask the seller to sign your third party
authorization before attempting to contact the lender(s)/servicer(s)
- Note: Be sure to ask the seller to sign your third party
Mortgage Insurance
- As a stakeholder in the transaction
- Must agree to the debt settlement
- Engage early
- Lender/servicer expectation is to mitigate loss while hedging against
declining values - This does not mean they will always chose a short sale over foreclosure
- Price the property within the range of fair market value
- Based on property amenities, condition, location
- Thereby preserving value in the community
Property Valuation and Pricing
- Market to the general broker population and the public
- Track activity, price reductions and area trends
All offers are to be presented to the seller
- The seller selects the offer that is to be submitted the to the
lender/servicer- Highest price with best terms
- Must be an Arm’s Length transaction
- To the extent possible encourage back-up offers
Present a complete and professional package, neatly “stacked,” to
the lender/servicer
- Do not send documents in piece meal fashion
- Unless instructed to do so (i.e. Equator)
- Don’t mess with Equator
- Meet task deadlines
- Submit only what is requested
- Be thorough
- Follow the template in our short sale tab on CBConnect.net .
Follow up
- As in any business transaction without follow up there is no sale!
- Verify that documents have been received
- If you are asked to resubmit certain documents do it!
- View post titled “short sale question of the month”. CLICK
HEREor search “smooth short sale” on www.insideCBNOW.com - Review the most common reasons documents must be resubmitted
- View post titled “short sale question of the month”. CLICK
- Review the documents and verify that all required information is included
before submission - For example, the seller’s name on the purchase documents must match the
seller’s name on the note - All parties on the note will be called upon to participate in the short sale
qualification process
Reconciliation of market value
- Be prepared to address disputes regarding fair market value
- Prepare a relevant Broker Price Opinion (template can be found in
CBConnect.net > Short Sales. - Discuss comparable sales used by lender/servicer BPO vendor are they
relevant? - Provide estimates for necessary repairs and photographs as applicable
Lender Approval Letter
- Be prepared to close escrow promptly after receipt of approval letter
- Most require 15-30 day close after receipt; this can be negotiated
- Final HUD1 should mirror the approval letter
- Unless specifically approved by the lender the seller should not receive any
funds at or after closing (exceptions would be any relocation incentives from
lender/servicer)
Arm’s length affidavit (“affidavit”)
- Most lenders/servicers require both buyer and seller to sign the affidavit
- The affidavit is designed to prevent mortgage fraud
- Many lenders/servicers require the real estate agent to sign the affidavit
- Some require notarization of the affidavit
- Unless specifically approved by lender the seller should NOT remain in
possession of the property.
Short Sale Negotiators
- Licensed
- Reputable
- Professional liability insurance
- Who pays
- Disclosure of payment on lender/servicer approval and HUD1 as an
appropriate line item.
Escalation Strategy
- Timing: When communication ceases or responses are clearly unreasonable.
Exhaust other efforts - How: When using Equator follow the protocol outlined therein. Otherwise
escalate to manager, senior management or escalation team - With tact and diplomacy
What Types of Hardships Might be Acceptable to a Short Sale Lender / Servicer?
Once a homeowner has reviewed their options and elected to pursue a Short
Sale; it is important to understand that the homeowner will be required to
establish and verify some level of hardship. Many homeowners believe that a
loss of equity in and of itself is a hardship. That is not the case.
Lenders/servicers are now carefully weighing various types of hardships. More
and more serious consideration is given to whether the hardship is “strategic”
or “unavoidable,” in other words: Is there a valid sustainable hardship that
qualifies the homeowner for Short Sale consideration?
For that reason I felt it might be helpful to provide a list of some of the
circumstances that may qualify as a valid and sustainable hardship. Remember,
the hardship must be verifiable! Providing written documentation is strongly
recommended.
| Type of Hardship |
Verification of Hardship |
||
 |
Military Deployment | |
Order of deployment |
|
Employment Relocation | |
Written verification from employer (current or new) |
|
Illness | |
Medical records or letter from Physician |
|
Medical bills that remains unpaid | ||
|
Death of family member | |
Copy of death certificate |
|
Divorce / Legal Separation | |
Decree or agreement of legal separation |
|
Order from the court to liquidate asset | ||
|
Child support disputes that impact financial | ||
|
Obligations | ||
|
Loss of employment /Income reduction | |
Written verification from employer |
|
Paycheck stubs; unemployment records | ||
|
Recast of mortgage interest | |
Copy of note or mortgage statement |
|
Miscellaneous hardships | |
Inability to maintain property, pay utilities, property taxes, delinquent accounts |
|
Other | |
To the extent possible provide written verification of any hardships |
|
Unemployment | |
Written termination of employment |
|
Records of unemployment income | ||
letter is their responsibility. The information ought to be truthful, accurate
and detailed. Another factor to consider; all parties on the note are typically
required to participate in the process. Be certain that the homeowner
signatures reflect the legal name(s) of the parties as set forth on the note and
trust deed.
Short Sale Question of the Month!
Q: Short Sales are so labor intensive, and it feels like my package sometimes falls into a black hole; what can I do to make the process more fluid?
A: It’s true, Short Sales can be challenging and time consuming; however there are steps to be taken that can go a long way towards moving the process along more smoothly. Often a Short Sale transaction can be stalled simply because the file documentation is lacking or improperly completed. Take the following tips to heart; they will alert you to the common errors that negatively impact the prompt processing of Short Sale proposals:
Contract terms and terms of the ancillary documents and forms are not readable. Take the time to be certain that all pages included within the short sale package are legible.
*Tip: If you can’t read it, they can’t either!
Page one of the Purchase Agreement is missing the APN number, address and/or zip code for the subject property.
*Tip: Fill in all the blanks; they wouldn’t be there if they weren’t important!
Be certain to insert the property address and zip code at the top of each page on the Purchase Contract.
*Tip: If you use zipForms6 this is automatically auto-populated for you.
Include the date on all pages as indicated.
*Tip: Same as above.
Page 8 of the Purchase Contract is missing a date by each and every signature.
*Need I say more?
Signatures of Buyers and Sellers are missing printed names underneath.
*Tip: Signatures are not always legible. The Short Sale Lender / Servicer needs to have the full names of the parties to the Agreement.
Names of Sellers do not match the names on the Deed of Trust.
*Tip: If you perform your due diligence at the onset by reviewing a complete property profile including all liens and the Grant Deed, this will not happen to you!
If the Buyer is a Corporation or Limited Liability Company (LLC), the signature must be an “Authorized Signatory” and the printed name under the signature must include the company name, printed name of the person signing, as well as their position with the company.
A new requirement by some lenders/servicers: Articles of Incorporation must be included along with Operating Agreement identifying the percentage ownership of all members.
*Tip: When buyer is an LLC or Corporation, be thorough and determine what the lender/servicer wants to see/know.
Listing and Selling Agents must provide DRE license numbers and date the contract.
*Tip: If there is a blank to be filled in – do it!
The Short Sale Addendum is missing the date. and/or the name of the Seller in the first portion of the Addendum
*Tip: If there is a blank, fill it in; if the form calls for the names of the parties, fill them in. The same holds true with dates. Include printed name under all signatures.
Advisories and Disclosures are not required to achieve Short Sale approval in most cases; if you are going to include them, they had best be complete.
*Tip: Send only what you need to send and be sure everything you do send is complete.
The HUD1 must have all Buyer and Seller names spelled correctly.
*Tip: Double check and triple check everything BEFORE it is sent to the lender.
The HUD1 should include the projected settlement date (Close of Escrow) AND the property address.
*Tip: Be thorough.
The Listing Agreement must be complete, including the full property address and all Sellers signatures as well as the date.
*Tip: Same as above.
The Hardship Letter must be current and relevant, within the last 90 days of the approval process.
*Tip: Ask the Seller to continue aggregating information throughout the process so the information can be updated without delay. Prepare the Seller for the process so there are no surprises!
Do not use outdated forms; the required documents are essentially “living forms” and must be current.
*Tip: If the Seller is requesting any type of incentive, such as a “relocation incentive”, include it on the HUD1. Use only the most current and relevant forms; don’t pull any documents from old file or previous on-line searches.
Short sales aren’t easy and they take time and energy. If you are going to spend your time, energy and your sanity, be sure to comply with the specific lender/servicer requirements
Short Sales Require Patience, Research, Know-How and Follow-up!
During this call there is no need to reference a short sale; simply contact customer service and the extent possible let the seller do the talking.
a. Have your third party authorization signed prior to the call
b. Verify the date last payment was received (compare to most recent mortgage statement)
Request last monthly s
tatement(s) from the seller in advance of the call
c. Determine whether or not the loan is a portfolio product
The Continuing Evolution in the Short Sale Arena
Just a quick post today! To all of my real estate colleagues and homeowners who may be feeling “distressed” due to the fact that the loan balances and other liens secured against their property exceeds today’s market value.
Bank of America (B of A) is a major force in the short sale market. As a servicer they manage hundreds and hundreds of investor’s portfolio, making them a household name when it comes to short sales.
While no short sale process is perfected and no two short sales are the same, B of A is taking strides to improve their process and communication.
Set aside some time and log onto their website:
www.bankofamerica.com/realestateagent there you will find a number of updated videos as well as other educational materials. All of which are designed to open the door to better communication and make navigating the short sale process just a bit easier for the public and the real estate community.
Make no mistake, B of A like other major servicers is looking for a sales price at as close to fair market value as possible. As a servicer it is their duty to represent their investor’s interest by mitigating losses!
Stay tuned for more tips later this month!