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I just finished a conference call with the U.S. Treasury’s Director of Policy for Homeowner Preservation, Laurie Maggiano. The conversation was in regards to the Government’s new plan to stimulate short sales, and she shed light on the effectiveness HAFA. No surprise, it’s not working well. That said, she encouraged us to be patient, and reminded us that HAMP did not initially work either, but has since become more-effective.

The initial goals of HAFA were to streamline the short sale process, and make things more-efficient in regards to what documents to submit, and who to submit them to. HAFA also intended to provide timelines, roles for all parties involved, and essentially remove the veil that banks seem to intentionally keep over the process. Other intended benefits of the HAFA program for Sellers include the release of deficiency liability, and placing money into Seller’s pockets upon closing ($3,000!). But what has REALLY happened since the HAFA program came out in Q4 of last year?

The answer so far is: Not much. In fact, professionals ‘in the trenches’ like me even scoff at the HAFA program, as it’s frankly made our professional efforts less-effective, and caused us unnecessary headaches. To expand on what I mean, the biggest obstacles of HAFA really are the jr. liens (2nds, 3rds, HOAs, etc.), and them releasing their deficiency rights (when applicable). In the beginning they lead us to believe that they will cooperate with our efforts, but when it comes down to it, they do not. The time it takes to discover this though we’ve lost valuable time, collected an extensive amount of unnecessary documents from the seller, and have possibly lost the buyer as well.

According to Laurie Maggiano, they are fixing this problem. How? First, required and dedicated Escalation Teams within each lender. Second, they are requiring a certain level of participation from each lender, instead of the program being voluntary as it has been in the since initiated in Q4 of last year. Last, they are listening to RE Brokers for suggestions on who to improve their systems, since we are the ones dealing with them on a daily basis.

Let’s hope these adjustments to HAFA work, making all of our efforts just little bit easier…

- Jeff Grant, President, ShhortSale.com

- Jeff Grant, President, ShhortSale.com

In a short sale, all lien holders – those with interest in the property – must agree to release their interest in the property for a negotiated amount. Positions ‘in front’ of them must approve that amount and give a certain amount of time to do so, so it’s a harmonious mix of greed, cooperation, and timing between them all. We’ve closed transactions with as many as four liens/encumbrances, but most short sales only require one or two to deal with. These are typically banks on the first, seconds, and thirds, but can also be HOA liens, mechanics liens (roof or pool repair company who wasn’t paid), child support liens, bankruptcy liens, and more. The group of liens on any home is structured as a hierarchy – first in senior position, and all following in junior positions according to structure, position, and date filed.

- Jeff Grant, President, ShhortSale.com

We’ve all heard or read stories about sellers attempting to short sell their home only to be foreclosed on mid-process, or even as the deal is wrapping up. I’ve certainly been a part of these kinds of transactions and though the cause was sometimes identifiable (buyers walked, seller is slow to cooperate with requests, etc.), many times it was not. In fact, there’s been a few times when I thought I’ve been able to undeniably prove that it was financially detrimental to the lender to foreclose on a particular home relative to a short sale. I’d rattle of supporting data such as, “lenders net 20% less on an average foreclosure vs. a short sale, due to foreclosure costs, tax costs, HOA costs, maintenance costs, liability costs, and opportunity costs of the illiquid money”, and “It’s better than a foreclosure, and beneficial for everyone involved.” Still, they’d foreclose, and I could never figure out why.

Recent research revealed that these lenders do not have to recognize losses to their investors in the case of a foreclosure, whereas with a short sale they do. This explains why there are instances where they prefer to foreclose rather than approve a short sale, as it actually is advantageous for them to do so. Apparently their reasoning behind the seemingly illogical and uncooperative negotiations did have some logic and strategy behind it after all. Side note: this is one of many great illustrations of how they act with only their best interests in mind.

A significant part of my job as a full-time negotiator is to uncover why these banks do what they do when it comes to short sales. Though I firmly disagree with their self-serving and even arrogant tactics, it’s helped me understand the reasoning for their efforts and in turn provide better service to our clients.

If you would like a knowledgeable short sale negotiator to bring this and the experience of working hundreds of deals to you, give us a call.

- Jeff Grant, President, ShhortSale.com

If you are a distressed mortgage customer of BofA, GMAC, JP Morgan Chase, PNC, or Litton Loans, you may be breathing a sigh of relief….at least for a few weeks. As of today, these five firms have halted all or part of their foreclosure efforts after admitting their ‘robo-signers’ may not have read each of the 18,000+ foreclosure documents that they sign per month – like they are legally obligated to. The result has been a halt on foreclosure proceedings until the mess is cleaned up. The President of BofA suggested in a press conference today that it will be a few weeks…

On another note, President Obama refused to sign legislation that would have made it more difficult for homeowners to challenge unjustified foreclosure actions, the White House said on Thursday. White House communications director Dan Pfeiffer said Obama was sending the bill back to the House of Representatives for further discussion of how it would affect the foreclosure crisis, which has become a hot topic after the aforementioned lenders have admitted to shoddy foreclosure proceedings. “We believe it is necessary to have further deliberations about the intended and unintended impact of this bill on consumer protections, including those for mortgages, before this bill can be finalized,” Pfeiffer said in a blog posting.

Why are Lenders advocating this bill?

As it was structured, The Bill would have required courts to accept all out-of-state notarizations, including those stamped by computers in a practice that critics say has been improperly used to expedite foreclosure orders. False notarizations figured in disclosures that GMAC, JPMorgan and other big mortgage processors filed false affidavits in thousands of cases, part of the wave of foreclosures that came in the wake of the financial and economic crisis. As someone who deals with their meticulous requests and processes on a daily basis, I am obviously pleased that they’re being held to the same standard.

“Banks realize that it’s going to be really hard to prove, and it’s going to be really expensive to review all the documents and make sure they are doing it right,” said Andrea Bopp-Stark, a Maine attorney who was involved in the case challenging GMAC’s foreclosure process. The unraveling of the mortgage paper trail could be costly for more than just lenders trying to foreclose on a home. For example, difficulty establishing the legal title to a mortgage could create headaches for companies that wrote title insurance on the property, and for all of the hands that touched the file along the way. “If it turns out these are mistakes in who owns (the mortgage), the claims against the title insurance industry could be overwhelming,” said Kathleen Day, a spokeswoman for the Center for Responsible Lending.

What does this mean for us – as borrowers?

For now, this means that the many of the biggest lenders are stalling foreclosure proceedings while they clean up their mess. I think it’s also encouraging to see some accountability for the lenders, and the attention that this has called to the industry can only help us (borrowers) in the long run.

As a distressed borrower, what should I do in the meantime?

Lenders have historically held foreclosure moratoriums during the last months of the year. Though the cause of this delay is different, I don’t think it will be as noticeable as some are hoping for this reason. I expect them to reconvene their foreclosure efforts as soon as this mess is cleaned up. Therefor, us here at ShhortSale.com will continue our short sale efforts on your behalf.

- Jeff Grant, President, ShhortSale.com

…if neglected, are the results REALLY that bad?

Growing up, my dentist basically said that if I don’t floss, my teeth may fall out. Today, my creditors tell me that missing payments or doing a short sale may ruin my credit. Well, my teeth are all still here, and my credit score is in the mid-700s after missing eight months of payments and closing my own short sale about a year ago! What am I missing??

Two weeks ago, a new client came through our website with a home in Texas. Noting his email, I see ******@equifax.com. I immediately called his cell, thank him for his interest, and asked some obvious questions. In a nut shell he said, “short sales really aren’t that bad on your credit, and I’ve seen that first hand. I’d like to do one myself.” That got me to thinking – are short sales really that bad? How important is credit score, and is the adverse effects of short sale, foreclosure, and even bankruptcy REALLY that bad on ones credit score?

The answer is yes and no. Can the results be bad? Absolutely. But, recent evidence has shown that much of the potentially detrimental effects are only hype.

Before my short sale (investment home, one loan), my credit score was 729. After missing eight months of payments and short selling over $200k short of what I owed, my credit score dipped to 679. Now exactly a year and four months later, my credit score is back to 728. No deficiency has been pursued either, and not a single collection call.

I have a good buddy who went through a BK only a few years back, and his story is even better! Post BK, he’s structured a successful loan mod, has provided a great lifestyle for his family, and was just approved for a $40k car! What am I missing here?

I know I should floss more, and I plan to. But I’m also being told that I should worry about my credit sore, and I’m not! With over 25% of consumers showing a 599 credit score or less, I just don’t see credit score meaning as much as it used to. So, please let this be an encouragement to you. If you are in a pinch (we all are!), keep your spirits up. Once you go through what you are, many times it’s not as bad as ‘they’ say it will be!

*Smile*
- Jeff Grant, President, ShhortSale.com

Disclaimer: I am not a Dentist, Creditor, or Zoo Keeper. Rather, just an attentive and passionate Short Sale Guru.

Picture a life raft made of sponge. Though a bit extreme, it’s a good illustration of how I view HAMP (Gov. loan-mod program) and HAFA (Gov. short sale program). Though they were designed to help us consumers and protect the overall housing market, evidence has shown that they haven’t done nearly as much as initially designed to do. According to Obama, the HAMP program was designed to “offer help” to keep 4 million borrowers in their homes. As of June 30th, 753,275 loans have been modified on a permanent or trail basis. As for HAFA, it’s still too early for official results. But as President of a company who helps up to a hundred short-sellers a month, I can confidently say that the results seem to be no different than HAMP.

Now, are you ready to get mad?

Let’s focus on the loan mods that have taken place through HAMP. After last weeks headlines resulting from the U.S. Treasury’s latest HAMP report card, one would likely have thought the program a huge success. After the report card was published, multiple media outlets trumpeted impossibly miniscule re-default rates of only 1.7% among permanent HAMP mods. Many of us said, “that’s impossible!”, and we dug deeper.

Buried in the fine print at the bottom of the report card is this statement: “a HAMP permanent modification is canceled for non-payment if it is more than 90 days delinquent.” So, true delinquencies (90+ days) are thrown out. If that’s not deception from the government, I’m not sure what is…

I’m really not a conspiracy theorist and I’m trying to remain optimistic through these difficult housing times, even if just for our clients. But reading information like this, it’s hard not to feel insulted and misled by our government.

Over the next six months, year, two years, I’m really hoping that we can find something solid to anchor to in this tumultuous housing market. Though the waves are big and tides unpredictable, we appreciate you placing your trust in us to navigate your short sales for you.

If you are considering a short sale and looking for a professional, experienced operation to help, please visit our Borrowers section to get started.

- Jeff Grant, President, ShhortSale.com

If you have experienced it first-hand, let me tell you that the short sale climate changes weekly. Sitting over my morning coffee, I thought I’d share a bit of info that I’ve learned and already seen reinforced this week – as it’s a pivotal change. In the past, lenders typically pushed back foreclosure dates if we have a short sale offer or other work-out option on the table. Well, that’s changing. The Investors/Trustors behind many of these delinquent notes are starting to ‘tighten’ their standards, and are deciding to not accommodate our efforts of loss mitigation in certain circumstances.

According to my executive-level inside source at BofA, many of their investors will no longer delay a foreclosure if they see:

- the borrower has a sale date in less than 30 days
- the borrower has made no attempt for a loan mod or short sale in the past
- the borrower has not made a payment in many months
- the incoming buyer is using an FHA or VA loan to buy the home because they are harder to close

I was speaking with my inside-source in regards to a particular deal that we were trying to delay the sale on. It was a home going to auction for a price of $188,400, and we had an offer on the table – about to close – for $250,000! Puzzled at the lack of common sense (and logic) of our bank negotiator for not delaying the foreclosure date, I called my inside source for her help and clarity. That is when she shared this new, tragic news that they’ll no longer be helping sellers who fit the criteria listed above. They said they’ll be enforcing this moving forward, and that it’s a trend we will see become much more prevalent with other investors (note owners). Their intent is to week out fake buyers, those homeowners looking to only extend the time in their homes, and to get a non-performing asset off their books using any means necessary.

Interestingly, data released on Thursday shows that Chase is now delaying foreclosure sales more than ever (up 30% just last month). My opinion is that they’re so far behind the short sale processing curve (see previous blog posts), that this is the only way for them to slow the growth of their distressed asset portfolio. They’ll come around eventually, also.

As you’ve seen in my previous blog posts, these lenders vary tremendously in their loss mitigation efforts. As you’ll also see, it’s been my experience that BofA is leading the way though, and truly blazing the trail that many of these other lenders are and will-continue following.

As always, we’ll be there paying close attention, and passing on all of info and ‘inside-secrets’ that we can to run the best short sale business possible!

My coffee is cold. Until next time…

- Jeff Grant, President, ShhortSale.com

Who caused this housing mess? Greedy lenders? Ignorant appraisers? Slick RE agents? Many blame it on lenders after they lowered their lending standards to accommodate an unhealthy share of subprime borrowers. (Note: As long as we have self-employment, shallow credit history, lawsuits, divorce and more, we’ll need subprime loans!) Well believe it or not, we found out today that more of us than ever are now subprime borrowers, and we need these now non-exhistant subprime loans more than ever.

New data released today by FICO Inc. show that a whopping 25.5 percent of consumers now have a credit score of 599 or below. That’s a market of more than 43 million people, and growing every day, too—thanks to unemployment levels that remain painfully high and not receding anytime soon. Subprime mortgages represented between 8 and 15 percent of total origination volume between 1995 and 2003. You can do the math – today’s announcement revealed a 200%+ increase since then.

Now that a quarter of us fit in the ‘subprime box’, this all underscores a unique irony to the financial mess we’re now in: much of the growth in demand for mortgages in recent history came out of the subprime sector, which is now exactly what 25.5% of us need. We need it, but can’t get it.

So, what happens now? There’ll be a handful of private lenders that make a bunch of money, and there’ll be many landlords that with inboxes full of applications from subprime borrowers looking to rent because they can’t buy. One could also argue that default rates on residential loans will continue increasing, as there’s a reason these borrowers were initially classified as ‘sub (below) prime (first)’.

One last thought to end it on – I’ve suggested to many of our clients that one’s credit score will mater less and less each day that passes. I think the news announced today supports this more than anything so far…

- Jeff Grant, President, ShhortSale.com

Freddie Mac CEO Ed Haldeman said the company has seen the number of its short sales increase 600% from 2008 as lenders look to dampen the impact of foreclosures hitting the marketplace.

In a statement put out this week, Haldeman said Freddie Mac is doing everything it can to prevent more foreclosures, and that short sales are becoming an ever-popular tool, particularly in situations where foreclosure is imminent and modifications have failed. I don’t think this is a surprise to anyone, as we’ve all seen this trend growing exponentially over these past 12-24 months.

That number could increase as the Home Affordable Foreclosure Alternatives (HAFA) program takes hold. The Treasury Department launched it in April to provide cash incentives to servicers for conducting short sales and deeds-in-lieu of foreclosure. Though I personally have yet to see this program really take hold, I remain optimistic and hopeful that it will. For more information, please visit our HAFA section.

RealtyTrac, an online foreclosure marketplace, is even preparing a short sale report to go along with its usual foreclosure report every month. It won’t be available until the end of 2010, however.

“Foreclosure alternatives like short sales and deeds-in-lieu help borrowers to avoid the stigma of foreclosure, shorten the waiting period before they can buy a new home, and may inflict less damage on their credit reports,” Haldeman said.

He added that these alternatives are also helpful to lenders and insurers. Citing several independent studies, Haldeman said banks lose more than $50,000 per foreclosed home or as much as 30-to-60% of the outstanding mortgage.

While short sales still add to the housing supply and can put pressure on local home values, they often avoid the lack of maintenance or damage foreclosed homes often display.

Overall, it’s a much-better alternative to foreclosure in most circumstances. We’ve been supporting this thought for years and through hundreds of deals. It’s just nice that the ‘press’ is starting to publicize it, as these times will be more-difficult for more people tomorrow than today.

ShhortSale.com has been here to help all along, and will continue to be.

- Jeff Grant, President, ShhortSale.com