Foreclosure in Minneapolis>Question Details

Mark Claesse…, Real Estate Pro in Coon Rapids, MN

Has everyone heard the good news about short sales?

Asked by Mark Claessens, e-Pro, NHSS, Coon Rapids, MN Fri Mar 16, 2012

The Attorney General just passed a ruling or some legislation that the banks will now be required to follow. They will be forced to expedite short sales and give a very quick answer as to whether they will allow the short sale, and if they will require any funds from the seller (i.e. cash, promisorry note, etc.).

Here is a link to the article and to my blog post. Please read this and tell us what you think of this decisiona and what it will mean to your sale or your business.

Mark

http://www.trulia.com/blog/Dependable/2012/03/ag_sets_time_l…

http://www.housingwire.com/article/ag-settlement-starts-cloc…

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Answers

14
Hi Mark,
Yes, I read about the new requirements imposed on the 5 major banks regarding expediting the short sale process. I posted a blog about it yesterday which included an article from realtor.org.

I think that it's a good start that these mortgage servicers must respond to a short sale package request within 30 days. They also must respond to any missing documentation from the package within 30 days and let the owners know of any deficiency payments needed.

I think this is good news and I'm hopeful that it will assist distressed home owners sell their homes short ot avoid foreclosure.

Laura Feghali
Prudential Connecticut Realty
1 vote Thank Flag Link Fri Mar 16, 2012
I think this new regulation is a step in the right direction.
1 vote Thank Flag Link Fri Mar 16, 2012
Hey, this is great news, Mark. I have a feeling this will impact everyone's business in very short order.
1 vote Thank Flag Link Fri Mar 16, 2012
Ahhhhh, wouldn't that be wonderful?
1 vote Thank Flag Link Fri Mar 16, 2012
My prediction: The new regulations will have no--repeat, no--effect on short sale processing.

Reading the article on the link you provided, there are so many loopholes in those regulations that it's guaranteed nothing will change. Let's consider a few:

REQUIREMENT
Servicers are required to give a decision to a borrower within 30 days of receiving a completed short sale request package.
COMMENT
"Within 30 days of receiving a COMPLETED short sale request package." Seems reasonable, except lenders have been known to, umm, lose documents so that they then proclaim that a package isn't complete. They sometimes lose the same document 2, 3, or 4 times. Then they'll have 30 days.

REQUIREMENT
The five largest mortgage servicers must adhere to a set of new standards.
COMMENT
The other how many--hundreds?--aren't covered by the new standards.

REQUIREMENT
Servicers will form internal groups that will conduct quarterly reviews and gauge compliance.
COMMENT
Kind of like the fox guarding the chicken coop.

REQUIREMENT
The internal group must review all short sale requests in the first two months of the quarter, according to Exhibit E in the settlement filed this week. And if a servicer takes longer than 30 days on more than 10% of the requests, the firm is considered in "potential violation."
COMMENT
Let's do the math. The internal group reviews short sale requests in the first 2 months of the quarter. So 2 out of 3 months. That third month is a "freebie." It doesn't count. But what about the first 2 months. It can take longer than 30 days in up to 10% of the requests and still not be in potential violation. And even if it exceeds 10%, that's only a "potential" violation. Here's how the numbers could work. You tell me if this looks speedy: Short Sale Reviews (in days): Month 1--30, 30, 30, 30, 30. Month 2--30, 30, 30, 30 100. Month 3--100, 100, 100, 100, 100. That works out to an average of 58 days, with 5 of the 15 exceeding 30 days. And that wouldn't even be considered a "potential violation."

REQUIREMENT
The settlement also requires a servicer to notify a borrower within 30 days if any documents are missing from the request package.
COMMENT
The borrower sends in the request package. On day 30, the lender notifies the borrower that there's a document missing. The borrower quickly sends it in. On day 60, the lender realizes it's misplaced one of the documents (or can't find it), and so notifies the borrower. The borrower sends it in. Then--assuming the lender now has a complete package, it can take another 30 days (or longer in 10% of the cases during the first 2 months, and forever if it's in the third month) to reach a decision.

REQUIREMENT
"If a real estate broker can get a checklist from the bank detailing what documentation is needed, everything can be provided up front, and the bank will be required to give a thumbs-up or a thumbs-down within 30 days. That's not a bad deal," said Chris Hanson of the short sale specialist Hanson Law Firm.
COMMENT
Agents already have been able to get the packages from lenders. That's not the problem. And, as you can see from the above, the 30 day time limit is a total fiction.

ARTICLE
Chase said it completes short sales – from receiving full documentation to approval – in a little more than one month.
COMMENT
Let's hear from some agents to see whether Chase is living up to its claims.

REQUIREMENT
When a servicer fails any servicing standard metric, including the short sale timeline, representatives must meet with a monitoring committee overseen by Smith. The servicer will have the right to correct any potential violation by installing an action plan, according to the settlement.
COMMENT
So if a servicer fails to meet the weak standards above, it meets with a monitoring committee. The servicer isn't found guilty (or innocent) and punished. Instead, if it's guilty, it can install an action plan to address the problem.

REQUIREMENT
If the potential violation is not cured, a servicer could face a penalty up to $1 million and another $5 million fine for repeat violations.
COMMENT
So if the lender isn't smart enough to figure out how to legally drag the whole thing out, and its internal review committee is dumb enough to flag the delays, it has to do an action plan. If the lender doesn't adhere to the action plan, it "could" face a penalty "up to" $1 million. Or it might not face a penalty. And the penalty could be far less than $1 million. And that applies to only 5 lenders?

Again, my prediction: Those regulations will have absolutely no effect on short sales.
1 vote Thank Flag Link Fri Mar 16, 2012
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
I heard yesterday and thinks it's about time!

Chris
1 vote Thank Flag Link Fri Mar 16, 2012
There is NO "move in the right direction", as these links and this "announcement" are OLD

Doesn't anyone bother to LOOK at the DATE the question was posted??

M A R C H 2012!!!!!!
0 votes Thank Flag Link Thu Nov 28, 2013
This is a move in the right direction and will make things easier for those involved in the transaction. I think it is also good for the bank since this will help move the inventory of distressed property faster.
0 votes Thank Flag Link Wed Nov 27, 2013
Thanks everyone for just seeing this again!! Ha ha, yes this good news was from a year and a half ago.

personally, I did not see much of a change.

the only change I saw was that short sales have slowed way down, which is great for the market. And.....they are now getting a little tougher to get through, too. and as for this new rule that was supposed to happen? I never saw an ounce of change.
0 votes Thank Flag Link Wed Nov 27, 2013
yoo hoo, to those responding to this today...................

this "good news" was posted in MARCH 2012!!!
0 votes Thank Flag Link Wed Nov 27, 2013
Hi Mark

About time, and great links.

Thanks
Perry
0 votes Thank Flag Link Wed Nov 27, 2013
Dude. Will you teach me everything you know? I will pay you.
0 votes Thank Flag Link Wed Nov 27, 2013
Arne, you are funny. I don't charge to share wisdom and knowledge, bro.

but that was a nice compliment!!
Flag Wed Nov 27, 2013
Dude - look at the date this was first posted! It;s OLD.
MARCH 2012!
Flag Wed Nov 27, 2013
Update.....nothing seems to have changed!! Anyone know or have you possibly seen anything positive with regards to this new rule?
0 votes Thank Flag Link Wed Nov 14, 2012
I don't think anything will change with short sales. There are too many entities involved with short sales. The legislation would have to be imposed on mortgage insurance companies, investors, servicers, etc.. This is why the past programs have little to no affect on short sales.
Web Reference: http://www.krislindahl.com
0 votes Thank Flag Link Tue Mar 27, 2012
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