Short Sale updates for 2011:


1. Equator System – This is the automated system that B of A, GMAC and a few other Lenders are currently using. It’s an easy way to track your short sales if you are Short Sale savvy, but certainly it is not an easy program to work with. I do, however, like their automated task reminders. I don’t like that it is still dependent upon a knowledgeable negotiator and with this system, it is even harder to actually have personal contact with your negotiator. It IS an improvement, however.

Getting B of A employees to look in the library (if you can find the library) is next to impossible. They haven’t quite figured out that working with the same negotiator until the sale is complete is the fastest and most cost efficient/organized way to close a short sale. Why do you have to start over every time a buyer walks when they walk 50% of the time..heck even more? B of A needs to change their policy where one negotiator handles the file until it sells, or until it forecloses…period.
Getting B of A employees to look in the library (if you can find the library) is next to impossible. They haven’t quite figured out that working with the same negotiator until the sale is complete is the fastest and most cost efficient/organized way to close a short sale. Why do you have to start over every time a buyer walks when they walk 50% of the time..heck even more? B of A needs to change their policy where one negotiator handles the file until it sells, or until it forecloses…period.


2. HAFA – New Guidelines just came out about HAFA extending the time they have to approve or disapprove the short sale from ten days to 30. They have extended the time, they have taken away the 6% rule but remain at 6k total to junior lien holder. Investment or vacant properties are now elegible if the homeowner lived in the property within the last twelve months.) This must be documented. HAFA is still paying the homeowner relocation monies, up to $3,000. The trick for HAFA is to allow it to run alongside your Standard Short Sale and then ask upon acceptance, if the Seller can qualify for HAFA..sometimes this works. I had several close in 2010 with full relocation fees paid out to the Sellers, but it needs stream lining.

3. SB 931 in CA – Sellers are no longer responsible for ANY deficiency judgments on first mortgages starting Jan 1 2011. Primary or secondary homes with PML’s used to purchase them (Purchase Money Loans). This is a huge incentive for people to short sale and will decrease or eliminate most strategic foreclosures. Banks need to lessen the need for confirmed hardship. If the seller is going to walk, they will. I had short sales rejected because “they weren’t in financial hardship” Well, who cares, as long as Seller is willing to bring some cash to close and the home is maintained..it’s much better than letting it sit vacant and decomposing and dragging neighborhoods down.

4. Federal MARS Laws – Prohibiting anyone but the listing agent or an attorney from processing loan mods and now short sales in certain states as well as prohibiting any upfront fee collection. New disclosures are required on any websites, emails, sales contracts, and when and if approvals come in.

5. Promissory Notes and Cash Contributions - Due to the number of short sale requests the banks are constantly hiring new negotiators. Most of the new negotiators are asking for promissory notes and cash contributions from the sellers. In CALIF, the seller will have no deficiency pursuit if they choose to foreclose, so why would they agree to pay money out of their pocket, or agree to pay a promissory note? Best to have a Buyer that has agreed up front that they can and will throw in some cash at the time of Offer If the Lender is adamant that Seller pay a promissory note too, the notes are usually for ten or more years at 0% interest. Remember that the notes are unsecured and more often than not, can be negotiated for approx. 10% of the notes value AFTER you close your Short Sale.

6. Vacant properties – Letters are being sent out to many homeowners right now stating that the locks will be changed on vacant properties. This is to protect the lenders interest, secure the property, and make sure the old renters or current homeowners’ don’t remove attached fixtures etc. from the property. Be prepared to see these letters. Put Tenants in the properties..if possible.

7. Hardships – I have had many banks declining files due to lack of hardship or reserves being too high. This has a lot to do with inexperienced negotiators. Sellers must go over their finances and monthly Income/Loss ratio carefully. Usually, if the negotiator isn’t a complete novice, (that’s the catch), an approval will be forth coming because it is more cost effective to short sale than it is to Foreclose and becoming more so each year..however, Sellers may have to be prepared to add some cash..

8. Mortgage Insurance – A loan with MI takes longer than a normal short sale to receive a counter and in many cases the MI company wants a promissory note from the seller. Find out at Listing if there is MI attached to your loan (usually it’s attached to the 2nd)

So the bottom line is that Short Sales in California will increase in number and the numbers of closed Short Sales will also increase in 2011. Lenders and Agents are figuring out the system, and Agents that specialist in Short Sales and have done so for several years at the minimum, will be able to close the deals in less time which is advantageous to the Sellers AND the Lenders.

For personal Short Sale information, give me a call at 760-574-7676