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SHORT SALE RULE CHANGES
by Ann Bone
Recently we’ve seen news items about Wells Fargo and
Wachovia “suspending” foreclosures and Freddie Mac hiring people to
literally knock on the doors of delinquent borrowers they cannot
otherwise get in touch with. What’s going on?
This is a small part of the Obama Administration’s
Making Home Affordable program, launched October 1,
2009. MHA will target support to working homeowners who have made
every possible effort to stay current on their mortgage payments by
providing new access to refinancing and offering reduced monthly
payments. Full information for homeowners and agents can be found
at
http://makinghomeaffordable.gov/
Specifically, there is a very simple Yes/No
questionnaire on the website to determine whether a homeowner is
eligible for low-interest refinancing (up to 125% of today’s’ market
value) and an equally simple questionnaire to determine whether a
homeowner is eligible for a loan modification bringing monthly
payments down to an affordable amount.
Over and over again, the public is warned of
“foreclosure rescue scams” and given information on recognizing
these scams.
How does MHA impact the listing, selling
and closing of Short Sales?
The MHA program is being managed by the U.S. Treasury
and Fannie Mae. It covers more than 85% of existing mortgage loans,
including loans owned or guaranteed by Freddie Mac or Fannie Mae,
FHA loans and loans managed by about 50 of the major loan servicing
companies. For those loans, the new MHA program and processes are
mandatory.
The good news is that this is an actual attempt to
simplify and standardize the short sale process, rules and
paperwork. Realtors who want to close short sales will need to be
aware of MHA:
1) There are clearly defined steps which the seller’s
lender(s) must now follow when (a) loan(s) are in default (or
imminent default). Refinancing or a loan modification through MHA
must be attempted BEFORE a loss mitigator will even consider the
possibility of a short sale. Then and only then will a loss
mitigator use a specific net present value formula to determine if
the lender(s) will net more from a short sale than from a
foreclosure. The decision is strictly financial.
2) Agents will continue to list properties with the individual
homeowners, but the lender’s loss mitigator will set the price and
listing term which will range from 90 to 365 days. The lender will
still need to approve any offers accepted by the homeowner.
3) Great news! Fannie Mae Servicing Guide
Announcement #09-03 clearly says there will be no negotiation of
short sale commissions. “..closing of pre-foreclosure sales may not
be conditioned upon a reduction of the total real estate commission
to be paid to real estate agents to the level below what was
negotiated by the listing agent with the borrower, unless the fee
exceeds 6% of the sales price of the property in aggregate.”
What should good agents do?
There is now more to know about listing short sale
properties. If you are helping homeowners in financial distress
avoid foreclosure, you will want to learn more about MHA so you can
help your sellers determine if they must work through the MHA
program in order to be eligible for a short sale. Take all
potential sellers who owe more than their house is worth and who do
not have assets to pay any loan deficiencies in full at closing to
http://makinghomeaffordable.gov/ BEFORE listing. Who knows, the
seller may discover they are eligible for a low-interest rate
refinance or a loan modification and not need to do a short sale at
all. You may help a distressed homeowner stay in their home.
A full and up-to-date list of the participating
lenders and servicers is available on
http://makinghomeaffordable.gov/. Any loan with these entities is
subject to the MHA program, so determining whether the loan(s) in
question are eligible or not eligible for refinancing or loan
modification is crucial before listing any property.
A partial list of lenders and servicers in our area
includes: Allstate, American Home Mortgage, Aurora Loan Services,
Bank of America, Bay Federal, Bayview, CCO, Carrington, CitiMorgage,
Citizens First, Countrywide, EMC, First Bank, First Federal,
Franklin, GMAC, Green Tree, HomEq, Home Loan, IBM, J.P. Morgan
Chase, Litton, Ocwen, OneWest, PennyMac, PNC Bank, RG Mortgage,
RoundPoint, Saxon, Servis One, U. S. Bank National, Vantium Capital,
Wachovia Mortgage, Wachovia Bank, Wells Fargo, Wilshire Credit and
many, many more.
Metro Brokers Realtors in Denver
Colorado for Homes and Real Estate
1st
Denver Home Real Estate, Ltd.
4760 S. Wadsworth Blvd. M202
Denver, Colorado 80123
(303) 587-5128
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