Video testimonial from a seller/client of one of the agents in my office at John L. Scott/Kent North. I handled the short sale end of the transaction. Two liens involved and no remaining deficiency as a condition of the sale–I’ll let him tell the story.

If you are a real estate agent in 2010 and you intend on doing a lot of business, you’re going to be involved in a lot of short sales.   For the vast majority of agents it’s just unavoidable.   Right now about a third of the closed transactions throughout the MLS are short sales or bank owned properties (REO’s).

Typically a successful agent with a balanced business will do a fair portion of their total business through past clients or referrals from those satisfied customers.   Just like any business.

But what about short sale customers?  If you have a customer who has to sell their home under circumstances that are facing a lot of Americans today they are not usually in the frame of mind to be thinking of the quality of the service you’re providing.    Having to sell your home as a short sale has a lot of benefits as opposed to the alternatives but still there is a lot of grief surrounding the decision to sell.    Short sales require a showing of hardship such as unemployment, divorce or medical issues–sellers aren’t usually smiling when they go into escrow to sign.  You can expect that a lot of those people are just going to fade off into the sunset never to be seen again.

So it can be a bit of a challenge to get referrals from folks who are doing short sales.   As you can imagine many are depressed and have trouble getting even the routine things done.  If they have their health and family with them then at least they have the support to keep some piece of mind and the mental health that goes along with it.

My point is that as an agent, if you are going to be doing short sales, you have to be doing the best job you can for your clients.   They may procrastinate and avoid you when you call but you still have to be the strong one and be on your game and just accept the cards that are dealt.   It’s the way you play your hand that determines the outcome in most cases.   Getting approvals from the banks is a good day but that’s your job and the way you get paid.    It’s unrealistic to expect referrals.   But do the right thing, put in the time, work longer hours and keep your client and all the other parties to the transaction informed.  One of my best friends from college will occasionally remark that he’s gone to working half days–12 hours.   You have to make the sacrifices to get the results, especially if so many are depending on you.

Last night I met with a homeowner that had been trying to complete a short sale for the past year.    Maria’s listing expired recently and one of my recent short sale clients gave her my number and told her to call me.   While explaining her situation and what had transpired during the last year she expressed frustration with her last agent who she said rarely called her with an update.

As I was completing the listing paperwork, she said she knew that when the listing expired that she still wanted to try and get approval for the short sale.  “I wanted someone who was going to let me know what was going on–that way I know things are getting done.  When Pedro said you were always calling him with updates or returning his calls, I knew you were the one.”

If you or someone you know could use my help, please call me at 253-709-8200 and I’ll be honored to provide them with the highest level of service.

Yesterday I received final approval for a short sale from Wells Fargo. The home in question is a 1950′s rambler in the Cascade area of Renton, WA. The loan was an FHA 100% cash-out refinance of $305,000 taken out in Feb. of 2008.

I listed the property back in November of 2009 and at the time, although there was still three months until the scheduled trustee sale date, I was a bit worried that the deal may not close because we were entering the slowest part of the year for the Seattle real estate market. Getting an offer at all let alone top dollar was going to be a challenge.

I was also concerned about the amount this loan was going to be short–in the first place there was no way this property should ever have been refinanced for that amount–the most it would have sold for before the mortgage meltdown would be around $260,000. Makes you wonder where the checks and balances were at during the underwriting process. It also helps you understand what types of lending activity helped contribute to the mortgage crisis.

The offer came in the second week of January from another agent in my office, Bonnie Stuart. The offer was $175k and asking 3% in seller paid closing costs. I’d originally listed the house at $195k, then dropped it to $185 before the Holidays. With a net to the bank about 50% of the underlying loan amount I had reason to be concerned about getting this one approved but I had the seller sign the offer and proceeded with long process of short sale approval.

That was about mid-January. It’s now mid-April and we just got final approval. It’s an FHA insured loan so FHA took a big haircut on this one–maybe this one is something they will go back and investigate to see where they went wrong, I’m sure it would be interesting to see how many sets of eyes looked the other way to make that refi go through.

So three months to get a short sale approval from Wells Fargo on a single FHA-insured loan. Were there unnecessary delays? Mostly in the last month. Half of that taken up by a set of a three page addendum Wells Fargo required to be added to the agreement that had to be signed by buyer, seller and agents. They never seemed to receive it; everytime I sent it they would send another version either to me or the seller and in another version. Finally I got a nice PDF form via email that I dutifully returned as well. Now you ask, why not just call and get these little things worked out and understood? Great idea. But the gatekeepers at lenders don’t let you talk to the people handling the file–it actually wastes time if an agent could call in and reach a negotiator anytime they wanted.

So it’s all done via email. As a real estate agent submitting a short sale packet, you wait until they are ready to contact you. After that you’re able to communicate and deal with the fine details leading up to an approval; such as re-negotiating price and terms.

So all the shouting is done and we’re moving to closing. The best part for my seller is on the first page of the approval letter that the credit agency reporting will state, “Agreed settlement short of full payment” and they agreed to relieve the seller from any future deficiency for the amount short on this loan–over $150,000. It cost them nothing to have me help them plus they were able to stay in their home an additional three months past the auction date. At least now they have peace of mind about being in foreclosure and they are even looking forward to rebuilding their credit.

If you or anyone you know could be losing their property to foreclosure, please contact me at 253-709-8200 to schedule a free consultation.

Announcing Wednesday that it was participating in the Obama administration’s   Second Lien Modification Program (2MP), Wells Fargo became only the second major servicer after Bank of America, to agree to participate in the program.

As I stated in a recent post, it has been obvious to me in the field, that most homeowners underwater on their mortgages really have no realistic chance of  keeping their homes when they have a second mortgage that refuses to make a modification.  It just doesn’t make much sense to have the first lien take the big gulp–reduce the interest rate and in some cases, even principal–and have the second mortgage continuing to get 10-12% and not be required to participate.   Considering that in a short sale or foreclosure scenario the second lien holder is almost always wiped out, it only makes sense for them to participate in the modification process to increase the odds of long-term success for everyone.

Now here is the real beauty of 2MP.   When a borrower’s first lien is modified under HAMP and the servicer of the second lien is a 2MP participant, that servicer must offer either to modify the borrower’s second lien according to a defined protocol or to accept a lump sum payment from Treasury in exchange for fully extinguishing the second lien.

Under 2MP,  if a servicer/lender is part of the program, they are required to contact the borrower and notify them of their opportunity for relief if their first mortgage lender is also part of HAMP.   Right now, this means that just Wells Fargo and BofA will be cooperating if they share the same borrower but there are likely to be many more servicers joining the 2MP program.  Hopefully we will be seeing more cooperating lenders making the kind of payment resets under 2MP that result in realistic adjustments for homeowners.

Nevertheless, we will still be seeing far more homeowners unable to qualify for modifications and who will be instructed by their lender to proceed with a short sale in lieu of letting the property go to the auction block.

Here is the original article.

Bank of America says it has systems in place to begin implementing the administration’s Second Lien Modification Program as soon as the Treasury releases final program policies and guidelines.   Known as 2MP, the program was introduced last April but no lender has been willing to officially adopt it until now.

Addressing the modification of second mortgages is tackling perhaps the real obstacle to finding a lasting resolution to the housing crisis–striking a balance  between borrowers’ ability to find a manageable combined housing payment and the risk of  “catastrophic” losses for the nation’s four largest banks.   I’ve been saying for some time now that homeowners affected by the downturn in the economy won’t be able to make the combined payments with first lien modifications only and the vast majority will quickly fall into default again.

“For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” said Barbara Desoer, president of Bank of America Home Loans.

The crux to the 2MP piece of the administration’s multi-pronged mortgage relief program will require modifications that reduce the monthly payments on qualifying home equity loans and lines of credit when a HAMP modification on the first mortgage is carried out.  Through its participation in 2MP, BofA says it will modify eligible second liens regardless of whether the first lien is serviced by Bank of America or another participating servicer.

The Treasury has estimated that up to 50 percent of at-risk mortgages have second liens.   Using non-government programs, Bank of America says it modified more than 57,000 second liens to assist financially strapped homeowners over the last two years.

The seven month legal saga which began in August, 2009 ended when Judge Jed S. Rakoff of the Southern District of New York, approved the previously rejected settlement between Bank of America and the Securities and Exchange Commission over its merger with Merrill Lynch.

Summing up what he thought of the controversial deal that caused a second government bailout of 20 billion dollars,  Judge Rakoff wrote, “This is a merger that may yet turn out well, but that could have been a bank-destroying disaster if the U.S. taxpayer had not saved the day.”

In trying to avoid an upcoming trial date set by Rakoff, the S.E.C. negotiated an increase in fine and penalties to 150 million dollars from the orginal 33 million dollar agreement rejected in August.   Facing civil lawsuits from shareholders, Bank of America continued to argue it’s disclosures were adequate, a position Judge rakoff found difficult to accept.

Referring to the failure to disclosure Merrill’s hefty bonus payouts or the mounting losses that eventually led to a second government bailout of $20 billion, “It seems obvious that a prudent bank shareholder,” the judge wrote, “would have thought twice about approving the merger or might have sought its renegotiation.”

To what extent, if any, Bank of America’s executives knew and intentionally failed to disclose pertinent information to shareholders may become more clear when it faces a complaint filed earlier this year by the State of New York.

See  the original article here  Judge Accepts S.E.C. v. BofA Deal

After talking to hundred’s of homeowners in default, I have to hand to them because it seems that the toughest thing to do is make a decision to let go.

Although efforts to avert foreclosures through loan modifications have slowed the rate of foreclosed homes, two recent studies predict that most efforts to modify loans with easier terms will only delay, not prevent, the loss of homes to foreclosure.

The studies—by John Burns Real Estate Consulting Inc. and Standard & Poor’s Financial Services LLC—reach the  conclusion that two thirds of all borrowers now behind on their payments will eventually see their properties go on the market over the next few years.  That would represent the bulk of the estimated 7.7 million households presently behind on their mortgage payments.

Although the problem is largely concentrated in Arizona, California, Florida and Nevada, the flood of homes coming on the market will continue to keep prices down in spite of increasing rates of absorption.

See the entire article here.

The Federal Trade Commission has proposed a new rule that would prohibit third parties, including loan modification specialists and loss mitigation attorneys, from collecting payment for foreclosure prevention services until after they obtain a documented offer from a lender or servicer for a modification or other form of mortgage relief.

In an effort to stem the tide of fraudulant companies accepting money from distressed homeowners and then failing to perform, the FTC is proposing a rule which would prohibit payment from the homeowner until an approval is received from the lender.

The Treasury Department announced this month that it is close to finalizing a widened incentive program to entice lenders and servicers to rely more on short sales as an alternative to foreclosure.

“Presumably, the Treasury is trying to help facilitate a transaction that will result in less loss to the lender than in the case of a foreclosure,” the California-based John Burns Real Estate Consulting said in a recent research note that reacted to the news.  That program – part of an initiative unveiled in May – expands on the Obama administration’s Home Affordable Modification Program, which has had a mixed record in mitigating housing losses in the U.S. economic downturn.  Of the scores of troubled homeowners eligible for loan modifications under the program, only 12 percent have received refinances, according to Treasury figures.
Scant modifications have contributed to an avalanche of foreclosure filings, unleashing a flow of repossessed housing in “shadow inventories” – a property glut that could drive home prices down and threaten the market’s recent modest gains. As DS News previously reported, some analysts estimate that shadow inventory could rise as high as 7 million units, foreshadowing a new housing crash.
That prospect – and the high costs of the foreclosure process – are two reasons government regulators are pushing short sales, in which defaulting homes are sold for less than the outstanding mortgage balance. Because the homes are sold for what the market will bear, the new owner is less likely to get “underwater,” owing more than the mortgage is worth. That’s a key predictor of a borrower’s likelihood to default.
“What they are trying to do is move some of these foreclosures in the pipeline, and bring them to a resolution before (foreclosure) happens,” Lisa Marquis Jackson of the California-based John Burns Real Estate Consulting told Reuters this week. “Twelve percent of these being modified isn’t enough to clean these up.”
Even short sales come at a cost, however. Realtors complain that lenders are prickly in short sale negotiations, often taking half a year to close them. Longer administrative delays raise the likelihood of a prospective buyer losing interest in a deal.
Under the upcoming Treasury plan, as much as $10 billion of government funds dedicated for loan modifications will be used to give lenders catch-up payments, to assuage their fears that property values could continue to fall.
The payments still have to be worked out, but one Treasury proposal has been to offer lenders $1,000 for going along with a short sale, and the same amount for deed-in-lieu transactions with similar results.
Borrowers also would be in line for incentives – possibly $1,500 in closing fees – for agreeing to a short sale or deed-in-lieu. Second lien holders could receive nearly as much – $1,000 – for signing away any claims in those sales, the Treasury said.