Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Cash Incentives and Relocation Assistance for Short Sales: A Guide to Government and Lender Programs

Seattle Short Sales - Wednesday, February 20, 2013

Only a few years ago, struggling homeowners who wanted to get out of their underwater mortgages had a tough time convincing their lenders to approve a short sale. However, things have turned around completely since then. Lenders now realize that, in most cases, approving a short sale costs them far less than pushing the homeowner into foreclosure. In fact, many lenders are now actually paying borrowers cash - as incentive payments or relocation payments - for completing a short sale!

There is a lot of information about the various government short sale incentive programs out there. But it's harder to find information about cash incentive progams run by the banks, and some people may be wondering if the stories they have heard, for example of cash payments of $20,000 or more to underwater homeowners, are true.

Well, they are! We have worked directly with most of these programs, and they really do exist! Here is a brief overview of the various government and lender programs that pay cash incentives, as well as samples of real approval letters that we have obtained, to show exactly how much cash was paid to each homeowner for completing their short sale:

Government Programs:

FHA Pre-foreclosure Sale Program: If the loan is FHA-insured and the short sale is approved, HUD will pay the borrower between $750 and $1000 towards relocation costs.

This Maple Valley homeowner received $1000 towards relocation on his FHA short sale: 6.23.12 - MetLife - 1st Lien - 79k Deficiency - Debt Settled - Short Sale Approval

VA Compromise Sale Program: If the loan is VA-insured, VA will pay up to $1500 in relocation assistance to borrowers who complete a short sale with a VA compromise claim. This temporary cash incentive program was brought into place in January 2011, and is currently set to expire on December 31, 2013.

This GMAC short sale approval letter for a VA loan allows a Spanaway homeowner $1000 in relocation assistance: 11.16.12 - GMAC - 1st Lien - 92k Deficiency - Debt Settled - Short Sale Approval

HAFA: Short sales that are processed through the federal government’s HAFA program pay a $3,000 cash relocation incentive to the seller. If the home is not owner-occupied, the payment goes to the occupant, not the owner. The incentive is not paid if the home is unoccupied.

This Sammamish homeowner received $3,000 in relocation assistance by processing her Wells Fargo short sale through the HAFA program: 3.14.12 - Wells Fargo - 1st Lien - 146k Deficiency - Debt Settled - Short Sale Approval

FHFA “Standard Short Sale” Program: This new program replaces the HAFA program if the investor is Freddie Mac or Fannie Mae. It also offers up $3,000 in relocation costs to the borrower - but it's important to understand that this amount is a maximum total relocation costs. For example, if the borrower receives other relocation contributions, e.g. from their employer, that amount is subtracted from the $3,000.

Lenders’ In-House Programs:

Bank of America Cooperative Short Sale Program: Available to select homeowners who apply for it before submitting a short sale offer through BofA’s Equator system. Cash incentives to borrowers range from $2,500 to $30,000, and are offered at BofA’s discretion.

This Seattle homeowner received $27,388 in relocation assistance through the B of A Coop program: 12.13.12 - Bank of America - 1st Lien - 110k Deficiency - Debt Settled - Short Sale Approval

This Arlington homeowner received $5,000 in relocation assistance from B of A (incentive itemized on HUD, but not listed in the approval letter): 11.19.12 - Bank of America - 1st Lien - 45k Deficiency - Debt Settled - Short Sale Approval

Wells Fargo: Cash incentives reportedly range from $3,000 to $20,000, and are offered at Wells Fargo’s discretion.

Chase: Cash incentives of up to $35,000 have been offered to select homeowners by invitation from Chase.

This Snohomish homeowner received a $20,000 relocation incentive for doing a short sale of his home: 9.12.12 - Chase - 1st Lien - 105k Deficiency - Debt Settled - Short Sale Approval

And this homeowner received a $25,000 “relocation incentive” for selling his Enumclaw home - even though the home that he sold was a rental! 12.13.12 - Chase - 1st and 2nd Lien - 161k Deficiency - Debt Settled - Short Sale Approval

In some cases, cash incentives may be “doubled up.” For example, a borrower offered a cash incentive from their lender may also be eligible for HAFA’s relocation incentive of $3,000.

This Kirkland homeowner received $2,000 from her lender, Bank of America, in addition to the HAFA $3,000 relocation assistance - for a total of $5,000 in cash for selling her home: 10.26.12 - Bank of America - 1st Lien - 122k Deficiency - Debt Settled - Short Sale Approval

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

To find out what short sale cash incentive programs you may be eligible for, contact us for a no-obligation, no-fee consultation: http://seattleshortsales.com/homeowners/

Fannie Mae Makes the Moves for Even Faster Short Sales

Seattle Short Sales - Sunday, February 17, 2013

The trend continues: Lenders do not want to foreclose on you. Foreclosure is not only undesirable for struggling homeowners trying to deal with underwater properties. Foreclosure is a costly way for lenders (including both loan servicers and investors) to deal with non-performing mortgages. Short sales are an alternative to forelosure, and this week, Fannie Mae announced a new tool to make the short sale process even faster and easier.

Some of the issues that can slow down a short sale approval include:

  • needing guidance for a recommended listing price for the property
  • disputing the BPO (Broker’s Price Opinion), or fair market value of the property
  • delays in hearing back from the loan servicer (bank)
  • stumbling blocks between parties during negotiation of an offer.

If a short sale case has come up against one of the issues listed above, the new Fannie Mae tool, called Home Path For Short Sales, allows selling agents to escalate the short sale case. When agents escalate the case, Fannie Mae will contact the servicer to address the issue that is stalling the short sale process. According the DSNews, agents who have used the Home Path For Short Sales tool to escalate cases saw results within one to two days.

Fannie Mae’s new Home Path For Short Sales tool continues the trend that we have been seeing in the last twelve months, as lenders and servicers turn increasingly towards short sales for loss mitigation. Late last year, new FHFA guidelines were announced that will streamline the short sale approval process . In addition, a few weeks ago, Freddie Mac released information about its “shorter short sale” approval process.

To find out whether a mortgage loan is owned by Fannie by visiting https://www.knowyouroptions.com/loanlookup. And find out more about Fannie’s new Home Path For Short Sales tool at http://www.homepathforshortsales.com/.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/
 

Freddie Mac’s “Shorter Short Sale”

Seattle Short Sales - Saturday, February 02, 2013

Freddie Mac Executive Vice President Tracy Mooney published a blog post last week outlining how short sales are about to become even faster, easier, and more transparent. We wrote an article about Freddie’s new “Standard Short Sale” program last November, back when those new guidelines first came into effect. A highlight of that program is that loan servicers (the bank you hold your mortgage with) are now authorized, in many cases, to approve short sales - without having to pass the file by the investor (Freddie, Fannie, etc.) or the mortgage insurer.

Mooney’s article focuses on how the new “Standard Short Sale” guidelines will make the short sale approval process faster. In fact, Mooney estimates that these new guidelines will knock off 50 to 75% off of short sale approval timelines! Some of the guidelines that will improve short sale processing times are:

  • Timelines for decisions: Servicers are supposed to make a decision about a short sale within 30 days of receiving the completed application. They may take up to 30 additional days if time is required to negotiate with third parties.
  • Better communication: If servicers take the extra 30 days to make their decision, they must provide weekly status reports.
  • Better escalation process: Servicers must provide borrowers with a clear procedure in order to escalate their file, including a dedicated 1-800 number for that.

Fannie Mae is also following these Freddie guidelines. Most residential home loans in America are backed by either Freddie Mac or Fannie Mae. You can find out whether your mortgage loan is owned by Freddie here: https://ww3.freddiemac.com/corporate/. You can find out whether your mortgage loan is owned by Fannie here: https://www.knowyouroptions.com/loanlookup

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

More Good News For Short Sales: New Guidelines from Freddie Mac and Fannie Mae Push Loan Servicers to Provide Decisions on Short Sales WIthin 30 to 60 Days

Seattle Short Sales - Thursday, April 19, 2012

Under direction from the Federal Housing Finance Agency (FHFA), Freddie Mac and Fannie Mae have issued new guidelines to their loan servicers about minimum response times for short sales. Starting June 15th, servicers will be required to provide a response to a short sale request within 30 days of receiving a completed Borrower Response Package requesting short sale consideration, or of receiving a purchase offer.

In cases where a decision has not been reached within 30 days, the servicer may take an additional 30 days to reach a decision - but they must notify the borrower within the initial 30-day time limit that the case is still under review. They must also then provide weekly status updates that include an explanation of why the decision is still pending.

These guidelines apply regardless of whether the short sale is being processed through HAFA or through Freddie’s or Fannie’s own short sale program.

Servicers also must promptly acknowledge receipt of documents. They must acknowledge to the borrower that they have received the Borrower Response Package within 3 days. If any items are missing from that package, they must inform the borrower of that within 5 days of receiving it.

These guidelines are similar to those proposed in Senate Bill 2120, which, if passed, would require lenders to make a decision on a short sale request within 75 days, with a possible extension of a further 21 days. Senate Bill 2120 has so far been read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

The majority of conventional mortgages are backed by Freddie and Fannie, so their stricter guidelines (of 30 to 60 days) will apply to most short sales. Although the guidelines come into effect on June 15, servicers are encouraged to start implementing them as soon as possible.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Can’t See The Forest for the Trees: CitiMortgage and HUD Dispute about the Details of Borrower Eligibility for the FHA Preforeclosure Sale Program

Seattle Short Sales - Friday, October 21, 2011

Here is an interesting case, of not being able to see the forest for the trees: the dispute between HUD and CitiMortgage regarding evaluating borrower eligibility for FHA’s Preforeclosure Sale Program (PFS). While HUD focuses on the details of borrower eligibility for the PFS program, CitiMortgage contends that the details of the plan are less important than the overall aim: cutting losses for both borrowers and lenders.

The HUD’s Office of Inspector General has released its new audit report of Citimortgage, Inc. According to the HUD audit report, CitiMortgage did not properly determine borrower eligibility for FHA’s PFS program. Included in the 103-page audit report is CitiMortgage’s response to the HUD claims.

Guidelines for the FHA PFS program are outlined in FHA Mortgagee Letter 2008-43, a letter to all lenders which outlines the aims of the PFS program.

FHA provides mortgage insurance for loans by borrowers who are considered to be “risky” - whose credit history is poor or moderate, or who can only come up with a small deposit.

The FHA PFS program is for borrowers who have an FHA-insured loan, and who find themselves unable to meet their mortgage payments, and unable to sell the home because it is worth less than the balance owing on the mortgage. The PFS program helps borrowers to avoid foreclosure by providing cash incentives to both borrowers and lenders, to encourage them to negotiate a pre-foreclosure sale, rather than let the mortgage proceed to foreclosure.

The dispute between HUD and CitiMortgage comes from different interpretations of eligibility criteria outlined in FHA Mortgage Letter 2008-43. HUD works with numerous lenders; they identified CitiMortgage for this audit because of “an issue identified
in a prior review and a review conducted by HUD’s quality assurance division.”

HUD reviewed 68 loans that CitiMortgage had submitted claims on. Claims paid out by HUD on these loans included mortgage insurance payments (on the deficiency balances) as well as incentive payments to both borrowers and lenders. According to HUD’s review, though, CitiMortgage did not properly determine borrower eligibility for the FHA PFS program for 63 of these loans. A total of nearly $5 million was paid out by HUD to CitiMortgage for those 63 loans. The auditors have recommended that CitiMortgage reimburse HUD for these claims.

The report details, case-by-case, examples where HUD contends that CitiMortgage did not determine borrower eligibility criteria. According to HUD, CitiMortgage did not follow eligibility guidelines detailed in Mortgage Letter 2008-43, including:

  • borrowers’ reason for default is a result of an “adverse and unavoidable situation”
  • expenses and income claimed by borrowers were not independently verified by CitiMortgage
  • borrowers with assets were not required to repay the indebtedness through a repayment plan
  • borrowers who were still current on their mortgages were accepted into the plan, and HUD disputes CitiMortgage’s determination of borrowers facing “imminent default”

CitiMortgage has responded to the audit (their response is included in the audit report as Appendix B), defending their practices, and indicating that only 7 of the 63 examples that HUD has presented have any merit.

Most significantly, though, CitiMortgage’s Director of Default Servicing, Brian McWhorter, wrote in his response to HUD:
“In our view, if the changes recommended in the draft report are implemented, the PFS process would slow down and negatively impact borrowers by now allwing them to qualify for a short sales treatment, possibly resulting in foreclosure and a higher loss.”

McWhorter goes on to explain that, in all of the sampled cases, the pre-foreclosure sale that was executed represented a lower loss to CitiMortgage than a foreclosure proceeding followed by an REO sale would have.

Avoiding foreclosure, through FHA’s Preforeclosure Sale Program and through numerous other short sale and foreclosure-prevention programs that exist, is in everyone’s best interest. The faster that short sales can be processed, the more foreclosures will be avoided - and the more quickly our housing market will turn towards recovery.

For more information, download The Homeowner's Guide to the U.S. Government Short Sale Programs, our free in-house guide to the FHA PFS program as well as to VA, HAFA, Freddie Mac, and Fannie Mae short sale programs.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Short Sales Continue to Grow in Spite of Decline in Other Foreclosure Prevention Actions

Seattle Short Sales - Tuesday, June 28, 2011

We reported to you last year that the FHFA’s second-quarter report showed that the number of short sales had increased by 250% over the same period a year earlier.

Well, that trend shows no signs of slowing down!

The number of completed short sales for 2010, at 107,953, was nearly a 200% increase over the number completed in 2009. And the FHFA’s Foreclosure Prevention and Refinance Report for April 2011 suggests that 2011 will be just as strong - with 35,406 short sales already completed as of April.

graph of short sales numbers 2008 2009 2010 2011

These rising numbers are especially significant if you take them as percentages of total Foreclosure Prevention Actions (FPAs). FPAs can be divided into two types:

  • “Home Retention Actions” which include loan modifications, repayment plans, and forbearance plans
  • “Home Forfeiture Actions” which include short sales and deeds-in-lieu

The total number of FPAs processed through the nation’s largest investors, Freddie Mac and Fannie Mae. has actually gone down over the past year, from 82,227 in the month of April 2010, compared to to 57,996 in April 2011. However, the reason that that number has gone down so much (that’s 30% in just one year) is entirely due to the drop in Home Retention Actions.

While Home Retention Actions went down, from 73,052 to 47,347, the number of Home Forfeiture Actions actually went up. As a percentage of the total, short sales went up from 11% (8,741 of 82,227) to 17% 9,701 of 57,996) of all FPA’s, just within the past year.

graph of foreclosure prevention actions 2010 2011

While many homeowners know that a short sale is the best and fastest way to recover from a mortgage that they can no longer afford, or from a negative-equity situation, loan servicers used to be reluctant to approve short sales. However, servicers and investors are also discovering that short sales are often in their best interest as well, as they may recover more on their loans than they would from pursuing costly and lengthy foreclosures. Several loan servicers have even started to proactively offer cash incentives to encourage their borrowers to pursue a short sale - and that will be the subject of our next blog post.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Loan Servicers' Ties to Mortgage Insurers Might be Too Close for Comfort.

Seattle Short Sales - Wednesday, December 01, 2010

Mortgage insurance is meant to protect the investor: the borrower pays the insurance premium so that if they default on the loan, the investor is protected. The loan servicer (which, in most cases, is the bank) is only an intermediary in the process. However, a recent report in American Banker indicates that some loan servicers’ position in the insurance deal is a bit too close for comfort - and quite possibly, a conflict of interest with the parties the servicer is supposed to represent. In some instances, loan servicers have force-placed insurance on their borrowers that is up to ten times as expensive as regular insurance: disadvantaging both the borrowers and the investors.

Fo the most part, banks (as loan servicers) negotiate mortgage loans with borrowers, and then they sell those loans to third parties: the investors, such as Freddie Mac or Fannie Mae. The investors pool the loans into mortgage-backed securities (MS), which are usually sold as bonds. The purchasers of the bonds earn an interest payment which is tied to the interest payment made by the borrowers on their mortgages.

Borrowers are required to have mortgage insurance, which protects the investors should the borrowers default on their loans. The loan servicers, once they have sold off the mortgage, become minor players in the deal - just intermediaries. And once they have sold those mortgages, their earnings as intermediaries are low: typically about 0.25% of the value of the mortgage. On a $200,000 mortgage, this translates to about $500 per year.

The American Banker report has uncovered many examples of close business relationships between the loan servicers and the mortgage insurers; in some cases, the insurers themselves are actually owned by the banks. The report quotes Diane Thompson, counsel for the National Consumer Law Center, as saying “There’s no arm’s-length transaction here.” She notes that this situation actually creates incentives for servicers to force-place excessive insurance coverage.

This close relationship may include outright ownership, or it may include kick-backs from insurers: payments to loan servicers. In one example given in the article, loan servicer EverBank replaced its client’s $4,000 insurance policy with a $33,000 force-placed one. They paid specialty insurer Assurant for the policy, and Assurant returned a $7,100 “commission” to EverbBank subsidiary EverInsurance - a payment far greater than EverBank would ever have received from servicing the loan.

In other instances, cases were uncovered where the banks had deliberately let an insurance policy lapse so that they could force-place a more expensive policy - stopping the advance of a delinquent borrower’s escrowed private insurance until the policy lapsed, then purchasing a more expensive policy and advancing payments on it.

These policies do not only harm borrowers - who quickly see the equity of their property stripped away as the large part of any payments they are making (or, if they are not, a growing arrears calculation) as funds go towards unreasonably high insurance policies. (American Banker uncovered one example of a $120,000 property with a force-placed insurance policy costing $10,000 per year - a policy that would soon strip away any remaining equity in the property). These policies also harm the investors, who become increasingly unlikely to recover their investment when borrowers' payments are going to insurance policies, and investment equity is rapidly being stripped.

The issue here is conflict of interest. As the American Banker report notes “there ceases to be a clear difference between the entity purchasing insurance and the entity selling it.” This works out even better for the insurer, because it means that the servicer is less likely to pursue claims (to avoid any apparent conflict of interest, and also because payments on the claims could possibly come from its own profits)) - when in fact, the servicer as representative of the investors should actually aggressively pursue any insurance claims arising from its forcibly insured portfolio.

Many banks are still reeling from the discovery of sloppy documentation practices, a discovery which leads to questions about the legalities of many past foreclosure proceedings - including accusations of “robo-signing,” as well as documentation with signing dates or locations that suggest that they may not have been signed in the presence of a notary, as required by law. These further revelations, of potentially "too close for comfort" ties between loan servicers and mortgage insurers - their lack of arms-length distance, and how their association might be to the detriment of both borrowers and investors - will only add to the mass of paperwork (and possible litigation) related to foreclosure proceedings to be expected over the coming months.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Just Released: The Homeowner's Guide to U.S. Government Short Sale Programs

Ross Kilburn - Tuesday, November 09, 2010
Seattle Short Sales, Inc. has just released The Homeowner's Guide to the U.S. Government Short Sale Programs. This guide covers the FHA, VA, HAFA, Freddie Mac, and Fannie Mae short sale programs. This is the most comprehensive guidebook available to homeowners and is available at no cost. This guidebook shows homeowners how to get their short sale approved in the fastest time possible.

This 40-page resource details the exact steps for getting a short sale approved through each government program. It covers eligibility, incentives, and settlement costs for each program. Included are discussion points, important things to know, and a helpful resource list.

The guidebook is published as a PDF, and can be downloaded by clicking here: The Homeowner's Guide to the U.S. Government Short Sale Programs.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/


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