Who Decides if a Short Sale is Approved?
I get asked this question often and wanted to clarity for those who do not understand the layers of decisions that have to be made on Short Sale Transactions... "Who makes the decision to approve or deny a Short Sale transaction when the Owner owes more on the home than it is worth?"
1. The Servicer - which is usually who you pay your mortgage to (i.e. Bank of America, Wells Fargo, Chase, etc.) they companies just offer their services of collecting the money on the loan for the investor and charge the investor a fee to do so. Once the Servicer takes their fee from the mortgage payment, the rest of the money is forwarded to the Investor for their return on your mortgage loan. In a short sale, the Servicer is the initial decision maker in approving a file. Once they make a decision on it, they will forward it along to the other two entities - the Investor and the Mortgage Insurance Company (if there is one).
2. The Investor - which has the "financial interest" in the loan. They collect the money that is left over after the Servicer has collected their fees. The investor can be large entities located here in the US like Fannie Mae, Freddie Mac, and some Servicers are the Investor on mortgage loan too (but not too often). Most loans are owned by Fannie Mae and Freddie Mac. Other Investors may include entities overseas that invested in the US Mortgage Market. The Investor has the final decision on the short sale to approve, change terms or decline it because it does not meet their "guidelines."
3. The Mortgage Insurance Company - which has insured your mortgage loan in the case that you stop paying, the Mortgage Insurance Company will pay out a fee to the Investor in order to protect their investment. Not all loans have a Mortgage Insurance Company involved. If there is a Mortgage Insurance Company involved, they have to agree with the Investor on the terms of the short sale. Same as the Investor, the Mortgage Insurance Company has the final decision on the short sale to approve, change terms or decline it because it does not meet their "guidelines".
As you can see, it is much more complicated than just getting one person's approval and each entity is designed to provide a protective layer for all parties involved. If you are thinking about or need to do a short sale on a property you own, make sure you do your homework on the agent that will be assisting you to make sure they understand the layer of entities involved in making the decision on the approval of your short sale. If you need an agent, I am ready to identify all possible options and, when possible, assist in the quick execution of a short sale transaction. Feel free to contact me anytime at Info@ForeclosureSolutionsVegasValley.com.
Investor's Special! Great Rental Property for $30,000
Monthly Profit Loss Analysis
| ListPrice | Dwnpmt | Taxes | Assoc Fee | Low Rent | High Rent | Est P&I | Mth Taxes | Insurance | Est Mth Pmt | Net Proceeds* |
| $30,000 | $7,500 | $689 | $115 | $625 | $695 | $142 | $57 | $14 | $329 | $296 |
*The figures above contain an estimated monthly net profit for this unit. All rental estimations were calculated from a conservative stand point (so if comparable properties could be rented for an estimated $600 to $800, I used the $600 to calculate the monthly net profit). I also figured all monthly payments based off of a 25% downpayment and 6.5% interest rate.
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Vegas Valley Market Dynamics
With so many statistics and numbers floating around the industry, I have found that Absorption Rate and Inventory Depletion are two calculations are two of the most important (I believe the unemployment rate would follow up in third place - which I will elaborate more on one of my next blogs). By utilizing Absorption Rate and Inventory Depletion, it allows one to observe the amount of listing inventory available on the market and is an accurate calculation of how quickly the inventory is being sold.
Tax Credit Extension Passed by House and Heads to President
The House of Representatives passed Legislation that extends the Homebuyer Tax Credit until September 30th which will be the closing deadline for those Homebuyers already under contract. President Obama will be signing the legislation into law by as early as today. There will be no gap between June 30 and the date the President signs the bill into law for Homebuyers to be eligible for the tax credit.Homebuyer credit extension heads to Obama
By Tami Luhby, senior writer July 1, 2010: 10:54 AM ET - NEW YORK (CNNMoney.com) -- First-time homebuyers will have until Sept. 30 to close on their purchases and land an $8,000 tax credit under a bill passed by the Senate late Wednesday.
President Obama is expected to sign the bill, which was overwhelmingly approved by the House on Tuesday. The deadline had been June 30.
The bill doesn't help anyone currently shopping for a home. Buyers must have signed a contract by April 30 to qualify for the tax break. At issue is when the deal must be finalized.
The Senate approved the stand-alone homebuyers tax credit shortly after a failed attempt to advance a bill that combined the credit with an unemployment benefits extension.
Senate OKs new Tax Credit closing deadline for Buyers in Escrow
Wednesday, June 16, 2010 - Inman News - CLARIFICATION: While the Senate has amended HR 4213, the "American Jobs and Closing Tax Loopholes Act of 2010," to extend the closing deadline for the tax credit, it has not held a vote on the amended bill itself. Senate Democrats have reportedly trimmed $60 billion in spending from the bill in hopes of passing it this week. The House and Senate must resolve differences between previous versions of the bill passed in both chambers before it can become law.The Senate has amended a bill to give homebuyers who were under contract on a home purchase by April 30 an additional three months to close the deal and claim the federal homebuyer tax credit.
Extending the deadline for closing from June 30 to Sept. 30 would allow lenders more time to clear a backlog of 180,000 homebuyers nationwide, said amendment sponsor Sen. Harry Reid, D-Nev.
The amendment to HR 4213, the "American Jobs and Closing Tax Loopholes Act of 2010" -- which primarily extends unemployment insurance benefits -- was approved in a 60-37 vote Wednesday. The vote on the amendment was mostly along party lines, with only four Republicans in favor and one Democrat opposed. The Senate has not yet voted on the amended bill itself.
"While I am disappointed that more Republicans did not support this common-sense measure to strengthen the economy and reduce the deficit, I am committed to ensuring that more Nevadans and Americans can become homeowners and that this amendment becomes law," Reid said in a statement.
The House passed an earlier version of the bill in December, which the Senate amended and approved in March. The House and Senate must resolve differences between versions of the bill before it becomes law.
The National Association of Realtors supports the amendment, saying Realtors have reported that as many as one-third of qualified applicants have been told by lenders that their loans will not close before June 30 because of the sheer volume of loan applications in the pipeline.
The amendment does not extend the deadline for homebuyers to qualify for the tax credit, NAR said in urging lawmakers to approve it, but simply extends the deadline for closing transactions already in contract.
"Since these applications were already in the pipeline and figured into the program's cost, the extension of the closing deadline should not incur any further government costs," NAR President Vicki Cox Golder said in a statement.
Bank of America making Short Sales a priority to sell over Bank Owned Properties
Bank of America Puts Short Sales Ahead of REOby JON PRIOR
Tuesday, June 8th, 2010, 5:04 pm - Bank of America, one of the largest lenders in the U.S., has instituted a policy of liquidating as many assets saddled with defaulted loans as possible before repossession, said Matt Vernon, the short sale and REO executive at BofA.
Vernon took the position at BofA in February. He has since announced plans to add 1,000 employees to the short sale staff. BofA currently holds more than 477,000 loans eligible for the Home Affordable Modification Program (HAMP), and has provided more than 600,000 modifications through HAMP and its own programs.
But Vernon said BofA will continue to make the short sale push when he spoke on a panel at REO Expo, being held this week in Dallas.
"We're going to do everything possible to liquidate property prior to foreclosure," Vernon said. "REO will still be available, but we will do everything we can to do short sales." Vernon said the goal is to get as close to market value as possible, or even over market value. "Short sales is not an investment strategy to get homes on the cheap," he said.
He added that agents who want a part of that market need to make short sales a major part of their business strategy through 2010 and into 2011.
Not just agents, but other companies in the default space were listening as well. Danielle Washburn, assistant vice president at Lender Processing Services Asset Management Solutions said lenders are beginning to put more emphasis on short sales because of recent efforts from the current Administration.
The Treasury Department launched the Home Affordable Foreclosure Alternatives (HAFA) program in April to provide incentives to servicers to provide short sales and deeds-in-lieu of foreclosure.
"Because of programs like HAFA, the process is getting easier," Washburn said. "But they remain very complex. There are sometimes 10 decision makers with just one transaction, the lender, the buyer, the seller, mortgage insurer, investors and more. Just one of them can stop the whole deal."
Milton Shaw, senior vice president of LPS Asset Management Solutions, said modifications and short sales through HAMP or HAFA could just be delaying the inevitable foreclosure and REO process, and the real estate business is growing frustrated with the delays.
"There's just been an incredible amount of frustration," Shaw said.
Both Washburn and Shaw agreed that more short sales will be on the way as HAMP continues to underwhelm both the industry and the public. In implementing the push for short sales, Vernon said a lot has been learned from HAMP.
