Southwest Florida Title Insurance & Real Estate Blog -

There has been a lot of buzz…

Short Sale Sign

…surrounding mortgage lenders’ moratoria on foreclosure actions. To wit, heavy hitters such as Bank of America, GMAC Mortgage, and JPMorgan Chase have halted foreclosure actions in over 20 states because potential defects in their processes. More on how that may affect the short sale market later. At the same time, Investors such as Government Sponsored Enterprise (GSE) Fannie Mae (FNMA) and servicing giant and lender Wells Fargo & Co. are forging ahead with abandon.

In August, FNMA released Announcement SVC-2010-12 , which revised and recited the “Allowable Time Frames for Completing Foreclosure” actions in a handful of states. In Florida, the allowable time-frame is 185 days. The Announcement also reminds Servicers of the consequences for not meeting the time-frames – “If there appears to have been a delay in the completing the foreclosure process, and the servicer is unable to provide a reasonable explanation for the delay, Fannie Mae may require to pay a compensatory fee.”

On October 1, American Banker reported that “Wells Fargo & Co. has stopped granting extensions for certain distressed homeowners to complete short sales.” From the American Banker report, this more stringent policy relates to servicing on behalf of investors such as “’the GSEs, HUD and those investing in private label’ mortgage backed securities.” The same policy does not seem to apply to Wells Fargo portfolio loans.

We have seen the effects of these policies. Over the last two weeks alone, we have lost three approved or nearly approved short sales to foreclosure sales which we could not get postponed. And it’s certainly not for lack of trying!

Short sales are tough enough. But in the face of additional challenges such as these policy shifts, action is required. If you are a seller or real estate agent with a Wells Fargo or GSE-invested mortgage and are exploring or working on a short sale, consider the following:

  1. TRIAGE: It is incredibly important to know what you’re up against. At Winged Foot Title, we use a 0 (foreclosure complaint filed) to 3 (final judgment of foreclosure granted) scale to monitor the progress of foreclosure actions. If a file gets to the 2nd or 3rd stage, it’s all hands on deck to get an approval or counter offer to the short sale request.
  2. COMMUNICATE: Once you know where you are in the foreclosure process, make absolutely certain that everyone involved in the transaction also knows. First, make sure that the lender communicates the short sale approval or consideration to its attorney. More often than not, they will not communicate such matters and you should not expect them to. If you can’t confirm that the lender has done so, you may want to reach out to the lender’s attorney in some way to communicate the status of your file. Second, make sure that the short sale buyer and/or their Realtor understand that they should be on the ready to perform and close; and that any delays may result in the property being lost to foreclosure.
  3. EXPEDITE: Collect and submit the documents required as quickly as possible. Like it or not, lenders’ receipt of and access to documents takes a while. This is especially true for those lenders like Wells Fargo who still rely on fax to receive documents.
  4. PRICE IT RIGHT: If you have had something on the market for a while and the foreclosure clock is ticking, it may be worth pricing the property more aggressively. After all, there is no short sale without a contract.
  5. DON’T RELY ON FORECLOSURE SALE POSTPONEMENT: For a time, it was relatively easy to get a foreclosure sale postponed in anticipation of a an approved short sale closing. Logically sound or not (most experts agree that a lender/servicer/investor would stand to benefit more or lose less from a short sale than a foreclosure then REO sale), it is becoming more difficult. Do not rely on your ability to postpone the foreclosure sale, even when you have a short sale approval that is good through a date beyond the foreclosure sale date.

Good luck out there and call us, the short sale specialists at Winged Foot Title, if we may be of service.


2 Responses

  1. jay beckingham Says:

    good stuff. where are you posting this, aside from here? is this on active rain?

    Posted on October 6th, 2010 at 6:42 am

  2. Jackie Nary Says:

    Thank you Chris for your insight. I have one of those approved sales that went to foreclosure. Hopefully we are getting the sale vacated. Fingers Crossed.

    Posted on October 6th, 2010 at 7:11 am

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