Automating Short Sales: The Next Big Thing
If 2009 was all about loan mods, 2010 will surely be all about short sales when the bulk of those loan mods go bad.
"As per the Treasury, should a modification fallout, not perform or if the borrower doesn't qualify, the borrower has to be offered a short sale or other option before a foreclosure," said Jim Satterwhite, executive vice president and chief operating officer at Infusion Technologies.
"We were very involved in the creation of that program. Technology is a major part of that program. It allows for electronic execution of the short sale approval letter and a request for approval of short sale documents. That gets everyone on the same page. Without technology you're stuck in voicemail or e-mail. With technology you go into a work queue that connects you with someone that is incented to make the short sale work."
Sterling Home Retention Services, a provider of loss mitigation and home retention services for mortgage servicers and investors, has moved to offer a single point of contact for home retention and loss mitigation services. Every aspect of the loss mitigation effort can be performed through a single provider, eliminating servicers' long-standing need to seek assistance from multiple sources, driving longer implementation timelines and greater vendor management oversight. Realizing that the next effort to avoid foreclosure will be to automate short sales to make that a viable option, Sterling has partnered to expedite that process.
"We'll confirm the borrower intent. If they tell us they do not want to stay in the house we'll gather all the information and run it through a short sale technology platform that engages all the participants to get an accepted price from the investor," said Ron Morgan, CEO at Sterling.
"In a lot of instances it makes sense to approve the short sale, get title and sell that property. The problem is that with all these foreclosures and short sales, what you're really looking at is a shortage of buyers. Is there enough buyers to absorb the properties and take advantage of these discounts given that the secondary market is still tight?
"Short sales will step up and gain more momentum in 2010. It will be a viable vehicle. One problem is that servicers still aren't able to contact a lot of in-trouble borrowers to engage them in a loan mod or short sale. Now with President Obama stepping up and saying, 'We're going to fine you and publish your name in the paper Mr. Servicer if you don't step up and help more borrowers,' they'll move quicker to avoid foreclosures and contact those borrowers to get them in a short sale if the loan mod doesn't work."
Similarly, vendor ELK Software has released Short Sale Commander Version 3.0. This upgrade will allow homeowners, buyers' agents, listing agents and title companies and others involved in the short sale process guest access to the files assigned to them. "Communication with agents and sellers is a significant part of running an efficient and profitable short sale business," said Erik Lovell, president of ELK Software. "Version 3.0 will give our users more time so they can build their short sale business and not have to proactively call or e-mail to keep their clients updated."
But the short sale process itself still needs more work if it's going to run smoothly in dealing with large numbers of at-risk borrowers. "We've been working with Re/Max and NAR to augment their short sale needs," explained Gerald Alt, chief executive officer at Heart Financial Services LLC. "While we have some experience in doing that, I think that process is broken. A typical conversation between a borrower and a servicer asking what do I need to do to sell the house generally includes the servicer saying that the borrower should call back when they have an offer on the property. Of the offers they end up getting, only one in six are approved. I think those offers were rejected because the servicer didn't assist the borrower to know what documentation needs to come with the sale.
"I don't know of a buyer that is going to wait two months to see if their offer is accepted. Technology will come into play here in a big way in 2010."