Given the number of blogs on the difficulties agents experience on short sales, I thought I'd take another shot at a canard that banks are now using to justify more delays, and that is the following:
"The investor is reviewing the file."
This is typically followed by 60 days of nothing.
Now, I don't argue that the investor is reviewing the file, I simply question the wisdom of the investor reviewing one file at a time.
Let's go back to mortgage 101: when a mortgage application is underwritten, it is reviewed by an underwriter to ensure that it conforms to the standards of the investor, which for example, could be Fannie Mae or Freddie Mac. Fannie and Freddie then buy these loans by the thousands in bundles. If Fannie Mae and Freddie Mac manually reviewed every new mortgage application one at a time we'd just be getting around to closing all the contracts written in 2007. It is utterly absurd for them to do so. Commerce would cease.
We have read a great deal on how the Obama administration and others are working to streamline short sales. Well, I don't personally see, nor have I read, any examples of the system getting any better. None.
It should take as much time to approve a short sale as it does to underwrite a mortgage application. The process is parallel to approving a loan. Once title is run and there are no other liens, they should issue an approval or denial, period. It completely analogous to verifying borrower qualifications, appraisal and title on the buying side. The bank negotiator is reviewing the borrowers finances, verifying hardship, and getting the home appraised.
It's simple. It has always been simple.
The only difference I can see is that the lenders have to be dragged, kicking and screaming, into taking a loss that, were the home foreclosed, would be far larger. Of course, once the bank does take back the house they are in a hot hurry to sell, to the point where they bully the buyer like an abusive relationship. These are the same buyers who have to sit on their hands for 4-6 months waiting for the bank to take a smaller loss in a short sale.
It is a mystery why banks resist short sales with such passion. They have enormous culpability in current market conditions. There is a word for people who would set your house on fire and then trip you when you run for a fire extinguisher, but I won't repeat it here. We've got to stop the barriers, impediments, obstacles and straw man red tape delays so we can begin a more meaningful recovery for earnest homeowners who have lost their jobs and equity. We are minimizing lender losses for goodness sake. It only makes sense, but asking the industry that screwed everything up to use common sense is a muse anyway.
Now someone please show this blog to Mr. Obama. I'm going to go watch Fight Club.
- J. Philip Faranda, Broker-owner, J. Philip Real Estate, LLC. 2010 Vice President, Westchester-Putnam Multiple Listing Service.
- Read my short sale blog here.
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I think the motivation is where the money is at. Services and "investors" alike are still short handed. Banks are set up to handle lending, but not service large amounts of defaults.
I hear you about "investor review." This is often handled by PSAs, and they can take their sweet time. I suspect part of the delay is due to fact checking to make sure the short sale conforms to PSA guidelines -- othewise a PSA can lose its tax exempt status -- but part of it is also due to being swamped with files. They don't seem to have the manpower to handle the volume.
It is more than likely an excuse by the middle man (servicer, clerk, negotiator) whatever you want to call them and not the actual investor.
J Philip if only it were like underwriting a mortgage application. It does seem on the surface that it would be a simple process. Maybe HAFA will bring a streamlined process.