The Department of the Treasury is about to release a plan geared towards making the short sale process faster and easier. Representatives from 25 major mortgage servicers were called to Washington, D.C., last month to discuss improvements to the current Obama administrations’s Housing Rescue Plan.
As you can probably guess, the Feds have more motivation to speed up and streamline the short sale process besides just recognizing the frustrations that many homeowners, agents, investors and title companies have expressed recently. No, the fact of the matter is that Obama’s Housing Rescue Plan focused primarily on Loan Modifications.
As I discussed in a previous post, loan modifications are, for the most part, an illusion. The vast majority of deliquent borrowers that me and my subordinates come into contact with rarely get a loan modification approved.
The Feds know this. That’s why there has been a recent spike in foreclosures again. The plan put the foreclosure rush at bay for a few months but the loan modifications went denied and back came the foreclosures. The Treasury Department is looking to short sales as plan B since plan A, loan modifications, did not pan out the way they wanted. Us short sale investors saw this coming all along.
Although turning to the government for help in streamlining anything is considered by many to be an oxymoron, here are a few things the Feds may be looking at doing to help speed up the short sale process:
- Standardizing the paperwork
- Providing cash incentives to lenders for completing a short sale
- Crediting sellers with a moving allowance
Currently short sales on FHA loans already allow for a $750 – $1000 allowance for sellers…this new plan may allow up to a $1500 to the seller at closing AND it also could available for conventional loans as well (not just government entity loans like FHA or VA). Further, Fannie Mae already offers a cash incentive ($1000 – $1500) to lenders who complete short sales…a drop in the bucket that rarely motivates any lender to get a short sale done faster or easier. They may have to up the anty to get many of these lenders to make the necessary changes.
You may be asking yourself why most lenders take such a long time to review short sale offers and such little time to approve or reject offers on foreclosures they have in their inventory. Especially considering a recent study found that lenders actually save 30% by going the short sale route over taking the property to foreclosure. The answer is strikingly simple…staffing, expertise and systems.
Many have done very few short sales in the past and have been forced into a steep learning curve of appropriately staffing, systemizing and training teams of people to handle the demand. Short Sales for banks are far more complicated than a standard foreclosure REO. Therefore, as the short sale requests have piled up, some banks have opted to focus their attention on their REOs and just let the short sales go to foreclosure auction. Thanks Mr. Bankers for your help and support!
At the end of the day, regardless of what our federal government does to improve the speed and ease of conducting a short sale, the fastest way to streamline a short sale is to give the lender exactly what they want, when they want it, how they want it and where they want it. Further, you have to follow up and verify every document you send has been recieved by the proper recipient. Finally, you have to know more about the whole process than most people. Experience, above all things, will streamline your short sales unlike anything else.
To give an example, I learned to play the banjo years ago. In watching professional banjo pickers, I asked my instructor how on earth they picked so fast. My fingers literally would not move anywhere near as fast as a professional’s fingers could move. He said, “Practice. If you practice enough, your fingers will one day move as fast as theirs. You may not play as smooth and graceful as they do, but your fingers will move that fast.” That’s my metiphor for you. Get experience, it’s the best way to streamline a short sale. And if you don’t want to negotiate hundreds of short sales to develop that experience, go find someone who already has walked that path in life and partner with them.