Tag Archives: short sale

FHA Trims Waiting Period for Borrowers Who Experienced Foreclosure

The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to reenter the market in as little as 12 months, according to a mortgage letter released Friday.

Borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHA loan, but with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.

For borrowers who went through recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond their control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.

According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.

The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.

By: Esther Cho, DSNews

BofA Makes Changes to Trim Short Sale Timeline

By: Carrie Bay, DSnews.com

Bank of America is making changes to its short sale procedures and introducing an improved task flow within the short sale technology module from Equator, BofA’s short sale management platform of choice. The goal: to reduce the timeframe for a short sale decision to less than three weeks.

Starting Saturday, April 14, real estate professionals working with BofA will be required to submit five documents for short sales initiated with an offer:

The acknowledgement and disclosure form, short sale addendum, and the form for third-party authorization are available through the company’s online Agent Resource Center.

The third-party authorization form is a new standardized document developed specifically for BofA. Previously, the lender accepted third-party authorization forms in differing formats and from a variety of sources when transacting a short sale.

Bank of America says it recognized a need for greater compliance and consistency with this important document and has now created its own form to standardize the third-party authorization process. The two-page document

requires signed acknowledgments from all borrowers and designated representatives in a short sale. Beginning April 14, BofA will accept only the official Bank of America Third-Party Authorization Form for short sales.

The bank’s new short sale process will enable real estate agents, brokers, attorneys, and other short sale specialists involved in pre-foreclosure transactions to complete tasks such as document collection, valuations, and underwriting simultaneously.

With these steps running concurrently, the timeline from initiation to closing is reduced. In fact, Bank of America says it will now be able to provide a decision on a short sale offer in 20 days. Typically, BofA’s short sale process has taken anywhere from 45 days upwards.

In continuing to streamline the decision process, should the buyer walk away from the sale, Bank of America is giving agents five days to submit a backup offer. Previously, the backup offer window was 14 days. Interested buyers are limited to two counteroffers and will receive a response from the lender within three days.

BofA notes that all email messaging between designated selling agents and their Bank of America short sale specialist will continue to occur within the Equator system. Agents will receive a standard notice via email to log into the system and retrieve their messages.

In order to implement the myriad of changes, BofA’s Equator platform will be down for 10-12 hours the night of Friday, April 13 into the early morning of Saturday, April 14.

Real estate agents and other short sale professionals are invited to review a Bank of America webinar outlining the coming changes. BofA is also offering task-by-task training on the new Equator process via a webinar to be aired on Thursday, April 19 from 4-5 p.m. (EST). Additional information can be found through the company’s online Agent Resource Center.

Bank of America’s short sale and REO executive Bob Hora says the company expects short sales to continue to increase and is taking steps to ensure it is providing decisions quickly and real estate agents are alerted of status as soon as possible.

Short Sales Bring 24% Greater Returns than Foreclosures

By: Krista Franks Brock, DSNews.com

The real estate professionals at Massachusetts-based McGeough Lamacchia Realty have been proponents of short sales for quite some time, insisting that everyone comes out ahead when a short sale is achieved as opposed to a foreclosure. Now they’re sharing the facts that back up their claim.

On average a home sold through short sale brings a 24 percent greater return than a foreclosed property, according to recent findings from McGeough Lamacchia Realty.

“This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale,” said a blog post on the company’s website.

The firm reviewed prices for short sale and foreclosure sale properties in 2010 and 2011 in Boston, Phoenix, Tuscon, Southern California, and Southwest Florida.

While banks often offer incentives to homeowners who pursue a short sale, “more needs to be done to promote short sales,” McGeough Lamacchia said.

Specifically, the firm points out that Fannie Mae and Freddie Mac are not offering the cash incentives for short sales that are now standard through the Home Affordable Foreclosure Alternatives program.

“Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure,” McGeough Lamacchia said in their blog post.

Bank of America Offers Up to $20,000 to Entice Short Sales










Bank of America is offering up to $20,000 to select Florida homeowners willing to agree to a short sale instead of entering foreclosure.

To sweeten the deal further, the nation’s largest lender will consider waiving the deficiency on the loan, which allows homeowners to sell the house for less then they owe without having to make up the difference to the bank. It can save homeowners thousands of dollars.

Not every Bank of America customer in Florida will be eligible for the program, which pays a minimum cash incentive of $5,000. It’s targeted toward home­owners who cannot afford their mortgages.

To quality, the short sales must be submitted for bank approval by Nov. 30 and must close by Aug. 31. Sales already under contract are not eligible; neither are properties outside of Florida.

This is a “test-and-learn” program being rolled out only in Florida because of the higher foreclosure rates than other parts of the country, said Christina Beyer Toth, a Tampa-based spokeswoman.

Florida is seen as a viable market to gauge short-sale response when presenting home­owners with relocation assistance, she said. If successful, the plan could expand to other states.

The bank notified select Florida real estate agents this week about the offer.

“It will get a lot of people off the fence about wanting to sell their home,” said Steve Capen of Keller Williams Realty in St. Petersburg. “This makes sense.”

What’s in it for Bank of America? It saves attorney fees, court costs and property taxes by avoiding foreclosure. It also speeds the process of getting bad loans off its books and gets the properties back on the market faster.

Capen, who specializes in short sales, plans to heavily market the offer to clients. But he cautioned that homeowners shouldn’t get overly excited because many of these plans have restrictions.

“It will only help a fraction of the people,” he said.

Homeowners get the cash after the short-sale deal closes. A caveat: Homeowners might have to pay income taxes related to the deficiency waiver and the cash payout.

The cash payouts give home­owners a reason not to trash their homes or strip them bare before moving out. When houses enter foreclosure, home­owners can essentially live for free until banks take possession at the end of the court process, which takes an average of nearly two years in Florida.

Attorney Chris Boss of Yesner & Boss said the deficiency waiver will enable homeowners to buy a house without filing bankruptcy or waiting three years from when foreclosures become final.

“It’s a chance to get away from the house with some money in your pocket,” Boss said. “This is good for the economy.”

Other national lenders started similar programs.

Late last year, JPMorgan Chase began giving homeowners $10,000 to $20,000 and waived losses on the mortgage. The bank still suffers a loss in the process, but generally speaking, sale prices on short-sale homes are higher than foreclosed homes.

Real estate experts and economists have said the housing market cannot fully recover until the millions of distressed mortgages are removed from the system.

Article is from St. Petersburg Times.

5 Reasons Why Real Estate Deals Collapse

Almost a third of the escrows that open today fall apart, a disheartening fact for buyers, sellers and agents — but mostly sellers, who often have been waiting a good long while for a viable buyer to come down the pike.


The good news is that we know why deals are imploding and have some solutions:

1. Banks aren’t lending money.

Oh, they say they are alright. But we know better, don’t we? Jump through hoops and promise them your firstborn and then maybe — maybe — you can get a loan if you put down 20 percent or more.

Tighter lending standards have made it hard for even credit-worthy buyers to get a mortgage. More than 25 percent of mortgage applicants are rejected and many more are simply afraid to even apply. And despite what you read about cash buyers, they come along as often as the tooth fairy. Less than 30 percent of sales are to cash buyers.

Solution: If you want to buy a house, find out first if you will qualify. Why waste everyone’s time, including your own, if you need to get financing and won’t be able to? Buyers need to get pre-approved by a lender and know once and for all where they stand. And understand that a pre-qualification letter is different from a pre-approval letter. A pre-qualification letter isn’t worth the paper it’s printed on; it is issued by a lender based on your answers to a few questions and maybe a credit check. It doesn’t obligate the lender to give you a nickel. A pre-approval letter means the lender has looked at your pay stubs, your financial records, your tax statements and says you are someone to whom — assuming nothing changes — they would consider lending money.

Another solution for sellers to consider is holding the mortgage for the buyer. Not without risks, but for those in situations with a lot of equity, it’s a choice to consider.

2. Buyers want perfection.

Inspection reports that turned up lots of little niggling things either used to be ignored or — at most — opened the door to some further minor price negotiations. All nickel-and-dime stuff. Today’s buyers, bombarded by bad economic news and consumed with worry about their own situations, get spooked by the smallest loose roof tile and they bolt from the deal.

Solution: Sellers should get their homes inspected before listing them. Fix what needs to be fixed and address everything else in the listing price set. The listing agent should make this inspection available to every serious looker. By doing this, you eliminate buyer surprise. The buyer may — and should — still have his own inspection done, but as a seller, you will be able to point to the report and say “we already told you about that.”

3. Appraisals come in too low.

This happens for a few reasons, but chief among them are appraisal pools — something that was created in 2009 as a result of new rules aimed at lessening lenders’ influence on home appraisers. What the lenders did was outsource appraisals to different firms, and in the process got appraisers who often aren’t as familiar with the communities of the homes that they are valuing.

Out-of-town appraisers who don’t understand local neighborhoods only have the numbers on the books to guide them. That means that short sales and foreclosures that lower your neighborhood comps are counted, but there’s no awareness of the desirability of your street.

Getting a low appraisal is big-time crazy-making. Suddenly the buyer who thought he got a great deal begins to question his wisdom. It also means that a lender might not fully fund what the buyer expected, and the buyer has to cough up some more money — if he even can.

Solution: Bring back the local guys who knew what they were doing. Our rule of thumb: If an appraiser can’t find your house without his GPS, he’s out of our comfort zone.

4. Short sales are a nightmare.

Well, it’s true. Short sales take longer to complete, are frustrating in the process, and while you are waiting for the bank to get its act together, prices around you are dropping further.

In the eternal quest for a bargain, some buyers have focused their home search on foreclosures and short sales. Ultimately, the lower price they may pay comes with a price tag that isn’t always visible: For short sales, it’s lost time. For foreclosures, it’s not knowing what problems the house has because bank-owned properties don’t come with seller disclosures.

Solution: Enough with coddling the banks. Why hasn’t the government set a time frame by which banks must give a thumbs-up or thumbs-down on short sales? Short sales are basically a negotiation between the homeowner and the bank: Will the bank take less than what is owed and leave the poor upside-down seller’s credit and remaining assets intact? Everyone gets that a short sale attempt is the last-gasp breath before foreclosure, so banks know the outcome if they say no. End of story.

Furthermore, why should banks get away with not having to disclose a home’s defects? Banks should be required to have the property inspected and disclose to buyers what they are getting. Even day-old bread in the supermarket gets marked as such. Why not a house costing hundreds of thousands of dollars?

5. Buyers get cold feet.

Buyers are just plain scared, and who can blame them? They could lose their jobs, lose their medical coverage and get wiped out financially because of illness. Truth is, just about anything could happen — to any of us.

Solution: There are many good reasons to buy a home and many good reasons to remain renting. Some of those reasons are financial, but many are not. Homeownership isn’t for everybody, but if it is for you, take the plunge. Talk to a financial adviser, a tax guy, your family, a shrink. Remember: Life is what happens while you are waiting for things to happen.

Article is from AOL Real Estate.

Is a Short Sale Better for Your Sellers' Credit Than a Foreclosure?

When consulting sellers about various alternatives to foreclosure, (such as a short sale) I am often asked if a short sale is a better than a foreclosure where credit scoring is concerned. The short answer is no, but there are several other factors to consider when advising your clients about a short sale vs foreclosure.

As mentioned above alternatives to foreclosure (i.e. short sales and deeds-in-lieu of foreclosure) are all weighed the same by FICO. They are reported as debt that is not “paid as agreed” and therefore are scored the exact same way as an actual foreclosure. According to FICO (Fair Isaacs Corporation) here is how they score various delinquencies:

· 30 Days Late – 40 to 110 Points
· 90 Days Late – 70 to 135 Points
· Foreclosure – 85-160 Points
· Short Sale – 85-160 Points
· Deed-in-lieu – 85-160 Points
· Bankruptcy -130 to 230 Points

The benefits of short selling vs. foreclosure.

· The wait to buy another home is shorter. Fannie Mae, Freddie Mac and the FHA determine lending guidelines for mortgages. If a job loss, loss of income, illness or some other detrimental event had an effect on your ability to pay your mortgage and subsequently lead to a short sale or a deed-in-lieu of foreclosure the wait is typically only 2 years as opposed to 7 years after a foreclosure.

· Immediate eligibility to purchase. Current Fannie Mae guidelines may allow the purchase of another home immediately. Even though the guidelines are on the books finding a lender who will fund this kind of loan is extremely difficult. For guidelines on purchasing immediately after a short sale I recommend that your clients consult a reputable lender who has successfully funded this type of loan.

· Your client shows that they are responsible. From a lender’s prospective a short sale or deed in lieu of foreclosure demonstrates that even though you had a life event that prohibited you from paying as agreed you didn’t just walk away from your home. You worked with the bank to liquidate the property in a responsible manner.

· Money to relocate. The HAFA (Home Affordable Foreclosure Alternatives) program offers money for relocation expenses to borrowers who short sell their homes. If the homeowner qualifies HAFA pays $3000 in relocation expenses.

The bottom line is that any liquidation of property without paying the full balance is not going to be good in terms of credit ratings. When making a decision on whether to short sell a home your clients should consider their entire financial picture and all of the options available to them.

This article is from inmanNews.