Recently we’ve seen news items about Wells Fargo and Wachovia “suspending” foreclosures and Freddie Mac hiring people to literally knock on the doors of delinquent borrowers they cannot otherwise get in touch with. What’s going on?
This is a small part of the Obama Administration’s Making Home Affordable program, launched October 1, 2009. MHA will target support to working homeowners who have made every possible effort to stay current on their mortgage payments by providing new access to refinancing and offering reduced monthly payments. Full information for homeowners and agents can be found at www.makinghomeaffordable.gov.
Specifically, there is a very simple Yes/No questionnaire on the website to determine whether a homeowner is eligible for low-interest refinancing (up to 125% of today’s’ market value) and an equally simple questionnaire to determine whether a homeowner is eligible for a loan modification bringing monthly payments down to an affordable amount.
Over and over again, the public is warned of “foreclosure rescue scams” and given information on recognizing these scams.
How does MHA impact the listing, selling and closing of Short Sales?
The MHA program is being managed by the U.S. Treasury and Fannie Mae. It covers more than 85% of existing mortgage loans, including loans owned or guaranteed by Freddie Mac or Fannie Mae, FHA loans and loans managed by about 50 of the major loan servicing companies. For those loans, the new MHA program and processes are mandatory.
The good news is that this is an actual attempt to simplify and standardize the short sale process, rules and paperwork. Realtors who want to close short sales will need to be aware of MHA:
1) There are clearly defined steps which the seller’s lender(s) must now follow when (a) loan(s) are in default (or imminent default). Refinancing or a loan modification through MHA must be attempted BEFORE a loss mitigator will even consider the possibility of a short sale. Then and only then will a loss mitigator use a specific net present value formula to determine if the lender(s) will net more from a short sale than from a foreclosure. The decision is strictly financial.
2) Agents will continue to list properties with the individual homeowners, but the lender’s loss mitigator will set the price and listing term which will range from 90 to 365 days. The lender will still need to approve any offers accepted by the homeowner.
3) Great news! Fannie Mae Servicing Guide Announcement #09-03 clearly says there will be no negotiation of short sale commissions. “..closing of pre-foreclosure sales may not be conditioned upon a reduction of the total real estate commission to be paid to real estate agents to the level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6% of the sales price of the property in aggregate.”
What should good agents do?
There is now more to know about listing short sale properties. If you are helping homeowners in financial distress avoid foreclosure, you will want to learn more about MHA so you can help your sellers determine if they must work through the MHA program in order to be eligible for a short sale. Take all potential sellers who owe more than their house is worth and who do not have assets to pay any loan deficiencies in full at closing to www.makinghomeaffordalbe.gov BEFORE listing. Who knows, the seller may discover they are eligible for a low-interest rate refinance or a loan modification and not need to do a short sale at all. You may help a distressed homeowner stay in their home.
A full and up-to-date list of the participating lenders and servicers is available on www.makinghomeaffordable.gov. Any loan with these entities is subject to the MHA program, so determining whether the loan(s) in question are eligible or not eligible for refinancing or loan modification is crucial before listing any property.
A partial list of lenders and servicers in our area includes: Allstate, American Home Mortgage, Aurora Loan Services, Bank of America, Bay Federal, Bayview, CCO, Carrington, CitiMorgage, Citizens First, Countrywide, EMC, First Bank, First Federal, Franklin, GMAC, Green Tree, HomEq, Home Loan, IBM, J.P. Morgan Chase, Litton, Ocwen, OneWest, PennyMac, PNC Bank, RG Mortgage, RoundPoint, Saxon, Servis One, U. S. Bank National, Vantium Capital, Wachovia Mortgage, Wachovia Bank, Wells Fargo, Wilshire Credit and many, many more.
How many short sales have you handled in the last year? Do you know someone who may benefit from this?
Tags: Metro Brokers, ann bone, atlanta real estate, short sales, rules, Making Home Affordable program, MHA, loan modification
November 2, 2009 at 8:29 am
This is great news! This seems far reaching and should help a tremendous amount of people as well as help stablize the home prices evenmore. A new option to use to help homeowners and to become thier lifelong real estate professional.
November 2, 2009 at 10:30 am
Hallelujah! It’s high time we have some short sale guidelines.
Today I have a closing for a short sale listing that has taken me a year to get closed with Bank of America. Last month I had another short sale listing with BofA that also took just over a year to close. Talk about needing the patience of Job! Hopefully the banks will increase staff to handle the volume.
The challenge has been the length of time it is taking for homeowner approval for participation in the MHA Program. If the approval process can be streamlined upfront, it will establish whether or not the property is legitimately a short sale and confirm a sales price the lenders will accept. Less guesswork! Should help reduce buyer (& agent) skepticim about making offers on short sales. That’s a very good thing!
November 2, 2009 at 2:46 pm
Great information Ann. The next one that I do will be a lot easier with these new rule changes! Thanks
November 2, 2009 at 3:32 pm
Very good news! Only regret, consistent guidelines for all lenders and agents have been so long coming. There are several families I could have helped with a quicker and clearer process. Maybe they would still be in their homes. My faith in the process has been restored, for a little while anyway!
November 2, 2009 at 4:01 pm
Hi Everyone,
I just started a new software company which should be launching in the next week or so to help out with managing the short sale process. I know one of the biggest frustrations I heard when doing market analysis was the tediousness of the process, so this sounds like great news for sellers and investors looking to get the process moving quicker!
http://www.shortsaleartisan.com (coming soon!)
November 2, 2009 at 4:48 pm
Ann, can you please make yourself available for the “Today Show”, “Good Morning America”, “CNN” and “Fox”! It amazes me how little is discussed about effective, positive recovery opportunities in the housing market by their so called experts!
If you are a reader of this Blog, please share this Blog post with your contacts, neighbors and friends! Who knows how many people can be saved from foreclosure by this simple, yet incredibly informative Blog!
Thanks Ann.
November 3, 2009 at 9:11 am
This is great news. Clear and consistnt guidelines are certainly necessary for the short sale process. These procedures could help the economy all around as Bonnie said, if the banks hire more staff to help the process, this would decrease unemployment and stabilize the housing market. How often can you kill a few birds with one stone.
Yeah OBAMA!!
November 4, 2009 at 8:34 am
Great News. I am hoping this will stop listing agents from setting unrealistically “Low Short Sale Prices” just to get tons of multiple offers, then making buyers all bid and wait months just to find out the bank negogiator will only take a price much higher than the short sale list price. Glad to hear that the bank negogiator will be more involved in getting the list price established first before the listing is posted.
My biggest hope is that short sale listings won’t get posted into FMLS till after some of this initial work is done between the seller and their bank. Would love to see the banks ask the sellers to complete their Hardship packet, complete their BPO, and get a Negogiator assigned –before they are allowed to advertise their short sale in FMLS. Think that will keep some of the longer waiting periods down for potential buyers who submit offers, and are having to wait 3-4 months for an answer.
November 5, 2009 at 1:35 pm
This is wonderful news. I am a Flex employee with the company and admittingly haven’t been doing any Real Estate work due to my full time job and other responsiblities. I just read this information and everyone’s responses. It lead me to remember why I wanted to be a Real Estate Agent. You see, three years ago, when I was on the verge of losing my home, I didn’t have the Making Home Affordable Program. I ended up losing my home and I wanted to make sure this never happened to me or anyone else for that matter. Shortly after losing my home, I became a student at the Academy.
Thank you so much Ann.
November 6, 2009 at 10:30 am
When someone hears the word ‘short’, one might think small, quick, concise and a real estate Short Sale is anything but. The past few days the news has been reporting that FNMA, etc will be contacting homeowners to discuss renting their homes in an effort to avoid foreclosure. Your timely article explains it so much better and in such detail. While the end goal of any agent’s transaction is their commission, to consistently get there an agent needs a good realtionship with the people involved. What better way to make a life-long client and open doors to many other referrals than by helping someone who dared to dream the Amercian dream of homeownership keep the dream alive?! Real Estate has always been profession that takes money to make money. Sometimes that means stepping back to look at the big picture rather than rushing to the bank to deposit a check. Metro Brokers agents sell homes and inside every home, most agents leave a little piece of their hear the grows the dream with every sale.
November 7, 2009 at 8:28 am
Ann, this is great news if the banks can actually make it happen! I’ve been involved with many short sales and my experience dealing with the banks has been very frustrating, to say the least! It has gotten to the point that I’ve hired an agent just to do the processing of my Short Sales which should help my clents in the long run! I think it would be helpful if FMLS & GAMLS would have a search category for “Bank Approved Short Sales” just like they have for “Foreclosures”. As many agents have commented before, the general public is not getting this information for some reason, so it is our responsibility to help educate them. I’ve added a special page on my website titled “Avoid Foreclosure” which outlines the MHA program and provides a link to the MHA site. Yvonne Thomas Brooks actually put the page together for me in a Computer Lab session and I would advise all Metro Brokers agents to consider this as a way to help get the information out! Time will tell if the banks can get their acts together and it seems obvious there are many more Short Sales to come! Maybe Metro Brokers could start a “Short Sale Processing Department” with agents paying a % of their commission to the Processors at each Short Sale closing? I have heard many agents refusing to take on Short Sales due to what they’ve heard about the process, but if they had someone they could turn the process over to, they may re-think taking a Short Sale! Personally I have no problem paying someone if it meant I did not have to deal with the banks! Just a thought!
November 11, 2009 at 9:48 am
Brad,
Right On!! I too, wish that FMLS and GAMLS had a section for short sales!! I also wish that agents would utilize the “pending” designation when they have an offer that is pending paperwork. It is so frustrating to have several properties to view only to find out (when the buyer is excited about seeing it) that it is under contract and we have no way of knowing!!
November 10, 2009 at 1:33 pm
Thanks for the clear explanation of this useful information. The banks have been so slow to respond in the past it meant that these sales were an option for only a few people.
I carried this information with me on an appointment yesterday and shared it with sellers who are facing values that are much, much lower than what was paid for the house. Hopefully, this will be a help to them
November 11, 2009 at 2:00 am
Thank you guys for sharing, I had not even realize a potential program of this magnitude was available for shortsales.