Speakers Address Short Sale Timelines
Dallas-When it comes to completing a short sale, the hardest thing is getting an answer from the bank to accept it.
This is what speakers and attendees stressed at the SourceMedia Best Practices in Loss Mitigation Conference here.
Donna Krall, executive vice president of operations at Heart Financial Services, said she believes the reason 23% of short sales are not completed is because real estate brokers can't get through to the right people to make the decision.
"Everyone has to decide what tool the industry is going to use as a basis of establishing the value as opposed to manually sitting down and looking at all of the loans. That means having the ability upfront to have an agreed-upon value as the basis," Ms. Krall said.
"Then you can set what's the tolerance, plus or minus, so that every adjustment doesn't have to be a phone call. You have a certain amount within that tolerance to be able to say if it's within a tolerance of 5%, then you can go ahead and make that or if its 10%, you need a secondary review of the loan. But there has to be a standardized process there."
Mortgage servicers are overwhelmed these days. It's a whole new ballpark for them from the standpoint of default servicing, the panelists said.
Many of the people who now want modifications or short sales, they are people who have been responsible, added Ms. Krall.
"It is the first time in their lives that they have found themselves in a financial situation that they have no control over. These are people who have lost their jobs, the value of their home has deteriorated totally outside their control," she said.
"They are trying to be proactive, and they can't get through to the servicers, because the servicers are so overwhelmed by what they have going on."
Rich Rollins, CEO of National Quick Sale and REO Sentinel, is working on an advisory committee to present information on short sales to the Treasury Department. They have addressed many of the major issues, including seller incentives and a review structure around that.
Another big issue is the deficiency judgments, which Treasury is likely to say is no longer needed. This means the bank would not come after homeowners for what is still owed on their home after the short sale is completed and they walk away.
National Quick Sale has a new program called SAFE for HAMP denials. At any given time there are probably 50,000 to 100,000 denials every month, Mr. Rollins said.
"We've got flow. We have commitments for about 4,000 regular short sales a month and probably 15,000 to 20,000 of the SAFE modification denial short sales. It's a busy time for us."
When the bank sends out a denial letter that says the borrower does not qualify for HAMP, it is mentioned that as an alternative to foreclosure, that borrower should contact National Quick Sale. If that doesn't happen within a few days, an outbound call campaign is completed, and NQS tells the borrower about SAFE as well as the Home Equity Lease Program. If the borrower would like to stay in the home, NQS can do the short sale and then lease it back from the new investor.
The immediate low-hanging fruit is to help clear out the clutter, so the short sales that are legitimate can be worked, either internally by servicer, through NQS, Heart Financial Services or another company like them for assistance.
Jerry Alt, president and CEO of Heart Financial Services, said the company is increasingly being asked to help in the short sale dilemma.
Servicers get thousands of requests per month, and there is no way to handle them. As a result of this backlog, Mr. Alt said he has heard that the average response time is eight to nine weeks from the time the borrower makes the request for a short sale.
"If it takes two months to just get an answer, there are very few buyers in this market who will sit around when there are so many other properties to buy," Mr. Alt said.
The problem with the short sale process is that there is always an inventory and the servicers can't get caught up. If there's an REO or a regular owner-occupied home not in distress, brokers can often close it in four or five or six weeks. Short sale inventory grows instead of staying static or shrinking.
Heart is going to offer to help do the triage for that process, Mr. Alt said.
"Let us take the inquiries, let us take the calls, let us go through the decisioning part for you on the front end. Take the people, give them some basic info, do follow-ups for a short sale and move on, so the they won't keep calling the servicer and consuming their efforts," he added.
"Let the servicer focus on the short sales with an offer where they have a number, a willing buyer, not let the clock run two months. We can help on coming up with the net present value, calling, and negotiation with the MIs. We can do that."
The key to all this is rapid resolution, he stressed. "I think it's five or 10 days. You can't wait until a better offer comes along. Your failure to approve this means 'no.' If I don't get your approval, it is put into foreclosure. No one wants to go into foreclosure."