Barton Property Group News & Tips

The Federal Housing Finance Agency (FHFA) announced new rules for Fannie Mae and Freddie Mac to service delinquent mortgages they own or guarantee; however, the regulations don’t include any penalties or sanctions for lenders who fail to comply.

The new rules require that short sale lenders make a decision on a short sale within 30 days of a complete application, and if more time is needed, they must give weekly status updates. The new requirements go into effect June 15.

Here is what to expect after June of this year…
• Lenders must acknowledge receipt of documentation within 3 business days.
• Lenders must notify borrowers within 5 days if more documents are needed.
• Lenders must review and respond to offers within 30 days of receiving all
paper work. Servicers can take up to 60 days if negotiations linger with
mortgage insurance companies and other stakeholders.
• Lenders must provide weekly status updates to the borrower if the decision exceeds past 30 days.

While these regulations will not perfect the short sale process or guarantee a time frame for closing, they will help buyers and sellers to know where the file is in the short sale process.

Bank of America, Chase, Wells Fargo, and GMAC all utilize an automated short sale processing software, known as Equator, that enables them to approve a short sale in as little as 30 days.

Most lenders will most likely comply by sending out a weekly letter stating that the file is incomplete and request more short sale documents from the homeowner The majority of short sales that take more than 60 days to get approved do so because the person submitting the paperwork fails to submit a complete package or the lender “loses” a portion of the submitted paperwork.

How much of an impact this will have on national short sales remains to be seen since Freddie Mac has jurisdiction over a small percentage (3%) of short sales.

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The newest government $25 billion settlement with the five largest mortgage servicers concerning so-called “robo-signing” practices could boost short sales since loan servicers will receive credit when they approve sales that include forgiveness of a portion of underwater homeowners’ debt.
Although the settlement is only expected to help a fraction of homeowners who owe more their properties are worth, it will help to remove some of the obstacles that have been keeping homes stuck in the foreclosure pipeline.
Announced last month, detailed terms of the agreement between mortgage servicers and a coalition of state attorneys general and federal agencies were filed today.
“We will see an increase in short sales, because lenders and loan servicers will get the same credit for doing a short sale, as if they did a loan modification or principal reduction,” said Rick Sharga, executive vice president of Carrington Mortgage Holdings LLC.
Time will only tell if this settlement is anything more than a slap on the wrist for wrongful actions, but hopefully it will incentivize lenders to accept more short sales rather than foreclose.

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I just signed up some more homeowners who desperately need a short sale on their property. They had previously signed up with an agent who “promised them they would never receive the foreclosure papers”. That was just stupidity on the agent’s part because he can’t guarantee a result if he knew what it really took to get the approval letter. After they received the foreclosure notice, they cancelled with that agent and called us.

Not only did he not prepare the homeowners for what to expect, he guaranteed results he couldn’t guarantee. This is a problem when you have inexperienced agents working with homeowners giving them all sorts of information (or not!) and then outsourcing the real work to an attorney’s office where the paid employees “process” the paperwork.

Short sales would have a higher success rate if they were consistently worked by people who actually know the banks’systems. Our success rate is about 95%. That comes from dealing honestly with people, continuing to educate ourselves in the field, and doing our own negotiations.

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Bank of American to slash mortgage balances by $100,000 or more. 200,000 homeowners have already been identified and will be sent information from Bank of America as to how they can reduce the principal and payments and keep their homes.

All this sounds so encouraging and also sounds like the previous false promises that delivered so very little. The part that doesn’t get a lot of notice is that it doesn’t apply to any Fannie Mae, Freddie Mac, or FHA backed loans. Good grief! That is most of the mortgages that are in trouble!

This is an example of the great PR spin put out by all the troubled banks and servicers that want to appear “good”. In reality, it will still be better for most people to accept a short sale and get a chance to move on with their lives. This will be another failed government program that didn’t deliver as expected. Again, it was anothe win for the financial institutions while costing the American taxpayers and the general American public.

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The more I talk to people who are facing foreclosure, I am amazed at the disparity of attitudes. Some people are feeling confident that their lenders are “working with them”. “I’ve already been told that they will work with me.” I sure hope so, because I hear from a LOT of others who have given up after being told that. They were told to pay for 3 months while their lender evaluated things. Then the homeowner struggles to pay for 3 months, but the bank hasn’t processed the paperwork yet. So they struggle to pay for another several months. Then the bank tells them, “I’m so sorry. You don’t qualify.” Meanwhile, their foreclosure is right around the corner.

Other people are hopeful – again – that the newest government programs will help them keep their houses. If it is like the previous ones, they will benefit a few, give false hope to many, and help out the banks – again.

Some people have lived in their homes for so long without paying that they have grown numb to the fact that eventually they will face an auction and have to move. They gave up a long time ago and are just riding the free train for as long as it lasts.

Other people are discouraged by struggling to pay their mortgage so that they don’t get behind on the mortgage, only to see help coming only for those who are behind. Some others I have talked to can afford to pay the mortgage, but don’t want to anymore because they owe hundreds of thousands more on their mortgage than their houses are worth.

Hopefully… the economy will continue to show signs of improvement and put people back to work. Hopefully… people will learn from this severe downturn and try to live within their means and make wiser financial decisions. Hopefully… we will get congressional leaders who will hold people responsible for the fraud that has taken place at the highest levels of our financial and government systems so that people go to jail.

Hopefully… people learn to depend on family and cherish relationships and the things money can’t buy. Hopefully… our very pressing needs motivate us to seek spiritual help and guidance. Hopefully… people begin to have hope again, which has been sorely missing.

Today I talked to 2 homeowners facing foreclosure and gave them hope that we can help them, because we can. It may be only a fraction of the number who need help, but I’m thankful that we are able to get them better solutions. There’s hope!

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Over the last 2 weeks we have gotten 2 really bad appraisals for short sales. One appraisal used comps from surrounding high-end towns to comp a property that backs on to the freeway in a low-end town. That appraisal means the bank thinks the property is worth $20,000 more than we even have it listed for. Even at that listing price, there is only one offer for $45,000 less than the bank now thinks the property is worth. All because the appraiser took the easy way out instead of the right way. That’s like comparing Arizona properties with downtown Manhattan.

The 2nd appraisal (in this case a BPO) was denied because it was too low. I thought they wanted a fair appraisal. Obviously the appraisal management firm didn’t like it since it was considerably lower than the previous one and they wouldn’t send it in. It was actually higher than 3 of the offers I have on the property. So a 2nd BPO was ordered and this agent does 60 – 80 BPO’s a week (impossible to do well) and sends an assistant (not a licensed agent) to take the pictures. Which means the person doing the BPO has never seen the property! So far, every BPO we have ever gotten from agents who do this has come in so high the bank won’t accept the offer.

The banking industry is still a long ways from being credible. Meanwhile, homeowners are losing their homes while these kinds of tactics continue.

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It’s amazing to think that while the banking industry is trying its best to eliminate any profits that real estate investors might make at their expense, that they are actually continuing to practice the very things that they are screaming about. Because dealing with short sales requires so much expertise and is so time consuming, many real estate agents have moved to hiring short sale negotiators who actually know the systems and can complete the paperwork in less time. They also have a higher approval rate. Now the banks are stating that they will no longer pay short sale negotiation fees.

Not only are they not paying them, some loan servicing companies are now CHARGING them – to the buyer. These are the same loan servicing companies that get money from the federal government to close short sales and get paid by the investor on the loan as well. As agents, we have to sign paperwork stating that we have not gotten paid outside of the commission and yet they are getting paid for the very things they deny us the right to do.

The part that really upsets me is the language in the approval letter we got today from AHMSI that stated that the buyer was being charged a short sale negotiation fee of 1%, but that amount was supposed to be disguised on the HUD so that the investor would not find out. They actually put in writing that the net to the bank should not reflect the short sale negotiation fee, but they would not approve the short sale without the fee.

I can’t believe that banks are trying to go after “short sale fraud” while they are allowing the loan servicers to practice in this manner.

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According to the latest data as of this posting on July 29th, foreclosures are still rising in 75% of all the metro areas in the US. Foreclosure actions, which include notice of default, scheduled auction and repossession, in the first half of 2010 rose in 154 of the 206 metro areas with populations of 200,000 or more.
The cities with the 20 highest foreclosure rates were still in Florida, California, Nevada and Arizona, but that doesn’t mean that the rest of the country is out of the woods yet.
5,000,000 loans are still seriously delinquent and banks are predicted to take over at least another 1,000,000 properties this next year through foreclosure.
Prices are still lagging 29% behind the peaks posted several years ago, but no real increases in pricing is expected until people are able to get jobs.
We are seeing increased interest in bank owned properties, but the real players are investors with cash to spend since the banks are either too slow to approve the loans or not lending. It is interesting to note that the same banks that only give you 30 days to close on one of their short sales or REO properties are the same banks that can’t close a new loan in the same amount of time they are requiring!
I think the real estate market will have a hard time recovering until the banks are run better than they are today. It is sad to say, but I don’t think that will happen. I see the banks staying afloat using government money, slightly altering their game plan, and then continuing the same bad servicing and systems they have been using. The American public needs smaller banks that have to live and die by their own policies.

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BoA encourages short sales

Bank of America (BoA) reported $35.7 billion in nonperforming loans, leases and foreclosed properties in Q210 – which is 15% above levels measured in the same quarter of last year. These loans and properties increased more than $5 billion in total aggregate balance since Q209. The total did drop by more than $200 million worth of these loans and properties from the $35.9 billion reported in Q110. They represented 3.74% of all outstanding loans, leases and foreclosed properties at the end of Q210. Since 2008, BofA and the acquired Countrywide completed nearly 650,000 loan modifications. During Q210 alone, BofA completed 80,000 modifications, including 38,000 trial modifications that were converted into permanent workouts under the Home Affordable Modification Program (HAMP). If a modification does fail, BoA is putting an emphasis on selling the home through a short sale ahead of foreclosure. At REO Expo 2010, Matt Vernon, the short sale and REO executive at BoA said that t he bank added 1,000 employees to the short sale staff and will “do everything possible to liquidate property prior to foreclosure.”

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If you are working any short sales, make sure you continue to check to see if there are any new liens. We had one that was accepted, but before we could close, they slapped a $30,000 credit card lien on the property. We were able to negotiate it down from there, but a sizable lien can affect the profitability of many of these deals. It may also keep a potential buyer from being able to close on one within the required time frame.

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