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Same Fannie Mae Short Sale Wrinkle But Different Approach
In short sale forums across the country, agents are lamenting the problems associated with Fannie Mae short sales and Freddie Mac on short sales, but I suspect that many short sale agents in Sacramento never even bother to look up Fannie Mae loans nor Freddie Mac loans prior to commencing the short sale — because some of them are way too focused on themselves and the fact they got a listing instead of putting the focus where it belongs: on the client, on the transaction itself.
It’s true that Fannie Mae and Freddie Mac cause havoc in a short sale. What else is new? But at least they are trying to do something about their muddled mess, even if it’s fairly ineffective, they get a B-plus for effort. One of the newer components of these types of short sales is our ability as a Sacramento short sale agent to request a pre-approved sales price.
The sales price, I should note, is the list price, which is not necessarily the BPO value. Of course, that’s been the problem all along, the BPO has very little to do with the price that Fannie Mae and Freddie Mac demand. This is like trying to pat your head with one hand while rubbing a circle on your stomach with the other. Then there’s the question of whether the offer price needs to meet the list price because we still don’t really know how much Fannie Mae or Freddie Mac will accept.
So, far, list prices are still above market value.
This is different than when Fannie Mae or Freddie Mac, after 8 or more weeks of processing the short sale, notifies us of its demand for a higher price. This is often a strategy that means: the government wants to send the home to foreclosure, but we don’t want to come right out in the open and admit it. This is the strategy that has agents across the county up in arms and frustrated with our government sponsored enterprises (GSE). I don’t really know why the GSE’s adopt this strategy, but in my world, I’d rather get this information on the front end than the back end, and so would my sellers.
That brings to question the status in MLS after an offer has been received. Because even in its new practice, Fannie Mae and Freddie Mac cannot seem to get us the pre-approved value prior to an offer. If we change the status in MLS to Pending Short Lender Approval, it means we don’t want any more offers. If the offer we have received is not close to or above the pre-approved price, we could be hosed if the buyer won’t raise the price upon demand, and we won’t get that demand from the GSE until we are closer to closing.
My solution for these dilemmas is to leave the file in Active Short Contingent status and allow backup offers.
What is the Problem With 2014 Sacramento Short Sales?
The problems with Sacramento short sales in years past used to lie with the banks and the buyers, but those days are long gone. Buyers and short sale banks are not the source of our misery today. Most of the buyers who enter an agreement to buy a short sale are willing to wait it out and realize there are a few fees the bank might not authorize such as pest and home warranties and 100% of the escrow fee. They possess realistic expectations. The banks have invested money and effort into establishing entire short sale departments that mostly did not exist from 2006 to 2008. They’ve put systems and procedures in place, and are constantly tweaking their efficiency and effectiveness.
There are some banks that face little struggles now and then such as the Chase HELOC departments in Equator and the banks that try to satisfy regulations and cope with the fallout from the National Mortgage Settlement, yet cause months of delays due to ineptness, but for the most part, you can’t really blame the banks anymore when a short sale takes forever. OK, you can blame Fannie Mae and Freddie Mac, but even those guys are shaping up their systems. Rarely a day goes by when I don’t receive a timely email from somebody at Fannie Mae to say by golly they have received the BPO, and they’re still working on a pre-approved value. It’s better than a poke in the eye with a stick, even if it’s sorta meaningless after 2 weeks.
I’m not getting a lot of pushback and attitude from buyers either because they are educated now. They do their own homework online, they talk to their buyer’s agent, and they’re prepared to wait for short sale approval. They realize that when they go into an escrow in which the Best Sacramento Short Sale Agent is negotiating, that escrow is likely to close. I cannot remember the last short sale that did not close, and I’ve closed hundreds of them — more than any other real estate agent in a 7-county area since 2006.
The problems I’m seeing today do not stem from buyers nor the short sale banks. Nope. They cannot shoulder the blame anymore in today’s Sacramento short sale world. Instead, the problems tend to stem from the sellers themselves. There’s not always a full proof way to figure out which sellers deserve help and which don’t really give a crap. So, try not to blame the agent if the short sale goes south because the sellers messed it up. Most of the short sale agents I know are professionals who care deeply about their sellers and sometimes can inadvertently overlook their shortcomings.
Short sale agents need to be more vigilant, especially since short sales make up such a small portion of our market (about 10%) — short sales now appeal to smaller pools of buyers and will take longer to sell. Fact, Jack. My advice to fellow Sacramento short sale agents is try to make certain the effort you expend is for a seller who is willing to cooperate and see it through to the end. Otherwise, cut the losers loose. You owe it your own sanity, and you owe it to the buyers. You may represent the seller, but you still owe honesty and good faith dealings to the buyers.
Fannie Mae Short Sale Valuation Issues
If you have a Fannie Mae short sale in Sacramento — or just about anywhere else in the country — odds are pretty much two-to-one that you will have a problem with the Fannie Mae estimate of value. The BPO is probably fine. Don’t blame the BPO agent. It’s Fannie Mae, not the agent, setting values. Fannie Mae seems to ignore the BPO. It’s the amount that Fannie Mae may decide it wants to approve the short sale that is the problem. You may be aware of the changes to Fannie Mae implemented last November, which were touted as a streamlined approach but as usual seems to be more smoke and mirrors than anything else — a way to make it look like they are doing something proactive when it’s the opposite.
You may ask how do I know these things? After all, I am just a Sacramento short sale agent, plugging along closing short sale after short sale, and that’s one of the ways I know what’s going on. Because I see it with my very own two sparkling eyeballs nestled above my honkin’ nose, that’s how. And I talk to other short sale agents across the country. I read press releases, announcements and news stories. I’ve been working on Fannie Mae short sales for years. I’m one of the few agents in this country who have probably read from beginning to end every single Fannie Mae supplement issued, not only to the regular GSE short sale processes but also the HAFA short sales through Fannie Mae.
I know what you’re about to read may sound like a conspiracy. That alone might make it seem unreal or fabricated, but I assure you it is very real. I can also assure you that I am not one of those whack jobs who sports an aluminum foil hat and scribbles pages of dribble to newspaper reporters. I also have no idea why the valuation problems are happening except to draw to conclusion that Fannie Mae wants homes to go to foreclosure so they can try to pawn them off on unsuspecting first-time homebuyers at inflated prices through its HomePath financing program, which requires no appraisal and is almost always way above market value.
I apologize for the fact it has taken me 3 paragraphs to set up my point. My point is Fannie Mae is routinely rejecting short sales by demanding prices that are higher than the market will support. It doesn’t come right out and reject the short sale as that would be too easy. Fannie Mae inflates values. If a home is worth, let’s say $200,000, Fannie Mae will demand, let’s say $260,000. It’s happened to me. I called the BPO agent and asked her how much she estimated for the BPO. She told me $240,000. Yet, Bank of America said Fannie Mae wanted $260,000. We presented an offer of let’s say $240,000 all cash and Fannie Mae rejected it.
Next, the months trudged on. Five months later we try again, only now the offers are only $220,000. This particular home has no updates and it needs work. I requested a reevaluation at Bank of America the day before Christmas. The day after Christmas, the REDC representative told me the value had to stay at $260,000. She did not escalate this or ask for a new valuation or even request documents from me.
I went directly to Fannie Mae next and asked Fannie Mae itself to reevaluate. The new BPO was conducted and that BPO agent called me to say the value she estimated was, let’s say, $210,000.
At that point, Bank of America closed the file. I have opened the file again.
There is a petition started by our friends at Short Sale Superstars, which agents and the public can sign to protest Fannie Mae’s behavior. It needs 100,000 signatures by February 25th. We are short today 97,493 signatures. Will you please sign the White House petition to force Fannie Mae to behave responsibly and ethically and to stop Fannie Mae from rejecting short sales in favor of foreclosure?
Fannie Mae is a government-sponsored entity under the protection of the Federal Finance Housing Agency. It’s your tax dollars supporting the beast. Don’t be part of the problem; be part of the solution!
Changes at Fannie Mae Affect Short Sales and REOs
Fannie Mae announced last August, in sort of a roundabout way, that it was not extending HAFA past December 31, 2012. Which is actually a blessing in disguise for many short sale agents as Fannie Mae HAFA short sales were risky from the get-go for sellers. That’s because Fannie Mae had so much red tape that by the time a seller jumped through of all the hoops, her home could be headed for foreclosure and Fannie Mae was not about to stand in the way of a foreclosure. I’d say that Fannie Mae never met a foreclosure sale it didn’t like.
The thing is if a home goes to foreclosure, then Fannie Mae can put it back on the market as an REO and hope some clueless homebuyer will opt for its HomePath financing program. There are plenty of clueless buyers to go around. The deal with HomePath is there is no appraisal. Is Fannie Mae stupid? No, Fannie Mae may be many things but stupid is probably not one of them. Without an appraisal requirement, Fannie Mae can charge a premium for the REO, and it often does. Sometimes, that premium results in a price that is 10% to 20% or more over market value. That means Fannie Mae HomePath homebuyers are underwater the day they close escrow. Isn’t that brilliant? That’s our government.
Fannie Mae has also changed its short sale procedures from a standard short sale to a traditional short sale HAFA II. It has recently put in place requirements that prevent a buyer from flipping a short sale. That’s OK because most buyers of a short sale owned by Fannie Mae are willing to live in the property and therefore do not want to flip it. They are the most likely buyers willing to put with the crap they have to endure to buy a Fannie Mae short sale. Many investors are not willing to walk down that road with Fannie Mae.
The restrictions state a buyer of a Fannie Mae short sale can’t sell that home within 30 days from closing. OK, that’s not so bad. However, a buyer also can’t sell within 90 days for more than 120% of the sales price. Fannie Mae doesn’t want a buyer to profit from its misfortune. Nothing wrong with that, either. It’s still willing to pay a incentive to the seller to do a Fannie Mae short sale, though, under certain conditions.
Real Estate agents, on the other hand, are screaming about Fannie Mae price fixing — because so many of those Fannie Mae REOs are overpriced — but I don’t know if you can call it price fixing. I am not a lawyer. I suspect a seller can choose to sell a home at whatever price it wants. This is America. There’s a sucker born every minute.
The Search for Intelligent Life in a Green Tree Short Sale
Talking to a Green Tree short sale bank negotiator can be like that cartoon about what dogs hear. You know what I’m referring to, right? The human is speaking to the dog, giving a lecture about not jumping on the furniture or perhaps not tracking dirt on its paws into the house, and the caption balloon over the dog’s head is an interpretation of what the dog hears, which is “blah, blah, blah.” This is what it feels like when I talk to a short sale bank negotiator. Words are coming out of the mouth of this Sacramento short sale agent, but they are ignored and must sound like incomprehensible gibberish to the negotiator.
This is so common place in short sales that my Sacramento short sales are ripe with illustrations. Let’s look at a Green Tree short sale, for example. Green Tree is famous for trying to extort extract payments from sellers during the short sale, and why not? Green Tree is a collection agency. If PNC or Bank of America transferred the servicing of your loan to Green Tree, you’re stuck with Green Tree and, by extension, so am I. But that’s OK, I don’t mind dealing with Green Tree as it’s typically good fodder for illustrations of ineptness.
The latest problem is a Green Tree short sale in which there are four individuals who have signed the mortgage. All four people have signed the promissory note and the deed of trust. Since Green Tree picked up this loan by assignment, it was not involved in the notarized signatures on the prom note and deed of trust. In fact, Green Tree might not even know how to recognize a promissory note and deed of trust nor understand the instruments even though these pieces of paper are the basis for its business. Because Green Tree has decided there are only 2 individuals noted on the note and deed of trust — because that’s what Green Tree’s incorrect records tell Green Tree.
Never mind that I sent Green Tree a copy of the deed of trust showing that all four individuals have signed it. The evidence is in front of their faces. Nope, Green Tree has demanded a new package, new hardship letter and all new documents signed by only 2 people. You might be asking what’s the harm in that? Well, the harm is Green Tree is not the lender. Green Tree is the servicer of this loan. The lender is Fannie Mae, making this a Fannie Mae short sale. And when Fannie Mae sees there are only 2 people who have signed everything, Fannie Mae will kick out this short sale package and reject it. Green Tree has refused to send the file to Fannie Mae unless we submit it with only 2 individuals. Do you see the problem?
We have talked to the negotiator and the negotiator’s supervisor. They both have demanded that we submit a package that will be rejected by Fannie Mae for being incomplete. Makes one want to grab Green Tree employees by their shoulders and shake these people.
I’m just a Sacramento short sale agent. Why am I having to explain to Green Tree who their borrowers are? Why doesn’t Green Tree employ people who can reason and think? The only way to remove a borrower from a mortgage, apart from death — which, believe it or not doesn’t do it either — is to refinance that mortgage or pay it off, neither of which has happened.
Today we will contact Fannie Mae and report this problem at Green Tree, in addition to contacting the supervisor’s supervisor at Green Tree. Somewhere, there is intelligent life in this universe.
