Succeed with short sales by calling banks early

Realty Builder

By Carole Hawkins, Staff Writer

The top piece of advice banks have for Realtors negotiating a short sale — contact a bank’s loan servicer early and get informed on how the approval process works.

The second most important tip — don’t wait until the short sale is approved before getting a buyer’s financing firmly in place.

“The biggest reason why homeowners fall out of the short sale once we’ve approved it — in 87 percent of cases — is because the buyer was not able to finance the loan,” said Jeff Butler, vice president Foreclosure Alternatives for JP Morgan Chase.

Obstacles matter, because a misstep or delay can throw a distressed home into foreclosure.

The U.S. Treasury Department in March held a short sales workshop in Jacksonville to help Realtors learn how to get short sales approved more easily.

Representatives from four of the nation’s largest banks — JP Morgan Chase, Wells Fargo, Citi and Bank of America — were also on hand to talk about how their companies process short sale applications.

A short sale happens when an underwater homeowner sells their house for less than is owed on the mortgage. It is more complex than a standard home sale, because a lender must get approvals from the investor who bought the loan and the private mortgage insurance company, as well as their own management in order to allow the sale.

Claims from a second mortgage and other lienholders must be settled. Also, the borrower must document the financial hardship which prevents them from making their mortgage payments.

“It’s not your typical buy-sell transaction,” said Rachael Kerns, assistant vice president, short sale liquidation manager for Wells Fargo. “All of these parties involved have to be in alignment and they have to agree to the short sale.”

The Consumer Financial Protection Bureau, created by the Dodd-Frank Act, last year implemented new rules to better serve homeowners who apply for short sales.

Jason Mathes, assistant vice president, national relationship manager at Bank of America, said banks have updated their processes since last year in compliance with that.

“We now have an earlier single point of contact assignment in the short sale process,” Mathes said. “And we’ve streamlined the financial document collection process.”

A borrower who is delinquent on a mortgage payment is told up front all of the options available to them, Mathes said. If a short sale or any other option is declined, banks must send a comprehensive letter explaining the reason.

Also, a loan servicer must not move foreclosures forward if a borrower applies for a short sale 37 days or more before the foreclosure date.

Bank representatives speaking to Jacksonville Realtors additionally shared some tips on getting their short sale applications processed:

• Contact the loan servicer immediately to start the short sale process. Don’t wait until an offer has been made on the house.

• Make sure a buyer’s financing is firmly in place. Don’t work off of a pre-approval letter that’s based only on a buyer’s stated finances. Make sure the bank did a full underwrite during pre-qualification.

• Get registered in Equator, a web-based system many lenders now use for loan service communication and to accept short sale documents.

• Tell the homeowner to open mail from the lender, or set aside a box for that mail and open it with them. Many homeowners in financial distress stop reading their mail and miss important announcements, like a foreclosure notice.

• Proactively ask the bank if the loan service is scheduled to be transferred to another company or if the home has been scheduled for foreclosure. Banks will not directly notify Realtors of such events.