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Feds to Allow Current Mortgage Payments for Short Sales
I realize how horrible it sounds when our government tells a seller that she cannot be current on her mortgage payments if she hopes to do a short sale. For years, the government has been telling people to stop making mortgage payments, if you can believe that. It’s true. Fannie Mae and Freddie Mac, government-sponsored entities, require a default for a short sale. Come November 1, though, all of that changes. The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, yesterday announced new streamlined short sale guidelines, effective November 1, to permit a short sale in eligible cases of hardships without a delinquency. It’s about time!
This means the feds will allow current mortgage payments for short sales. What a relief for sellers worried about delinquencies. The thing people don’t realize is there are different types of short sales. The type of short sale depends on the investor. Rules that govern a traditional short sale do not apply to Fannie Mae and Freddie Mac, including other types of short sales such as FHA or VA or CalVet. And let’s not even talk about the grandmother and granddaddy of all short sales: the Fannie Mae HAFA short sale or Freddie Mac HAFA short sale. Many short sale agents would rather be forced to walk barefoot across hot coals than to do a Fannie Mae HAFA short sale or a Freddie Mac HAFA short sale because those are painful enough for everybody.
Not only will a seller be able to remain current on her mortgage if she has a Fannie Mae or Freddie Mac loan, but the new guidelines give servicers delegated authority. Banks that service these loans can determine whether the seller’s hardship will qualify for a short sale. Common hardship reasons are:
- death
- divorce
- unemployment
- relocation
- medical
Plus, if a borrower must relocate due to a commute of more than 50 miles to work, which is a fact of life for many of us in California, that constitutes a hardship as well. This is a welcome relief for this Sacramento short sale agent and my sellers in Sacramento. Being current on mortgage payments for a short sale is a huge improvement. It’s like we’ve been beating our heads back and forth in the doorway for years. You know how good it feels to stop!
Now if we can just get Fannie Mae to stop sending short sales to auction because the short sale can’t close prior to the trustee’s auction date, we’ll have something to truly celebrate. We need a way to postpone the auction in a Fannie Mae short sale. Come on, FHFA, I know you can do it. We’re rooting for ya in Sacramento. But for now, us hungry little squirrels, we’ll take the peanuts you toss.
Who is Your Sacramento Short Sale Bank?
The seller’s mortgage lender is what will make or break the Sacramento short sale. Oh, sellers think it’s the value of their home or the dire circumstances detailed in the hardship letter, but none of that is as important as the short sale bank. Second to the Sacramento short sale bank is the investor. You can have a great short sale bank, for example, like Bank of America, but the investor can totally suck, like Fannie Mae.
When I talk to potential short sale sellers in the Sacramento area, the first question I ask is who is the lender. Generally, people don’t know if they have a Fannie Mae or a Freddie Mac loan. While they are busy vehemently denying their loan is held by Fannie Mae, I am busy running the address on my computer through Fannie Mae’s loan lookup site. By the time the seller finishes telling me how she is absolutely positive her loan is not held by Fannie Mae, I can find proof that Fannie Mae holds her loan.
It’s important to know whether the short sale bank has delegated authority or if the investor will be required to approve the short sale. All of these things are taken into consideration when giving a seller an estimated time frame to complete the short sale process. I’ve worked with so many banks that I’m often right on the nose with the amount of time it will take to do the short sale. I can look up my closings over the past year — I average about 10 short sale closings a month, more than 100 a year — and give my best guess based on how long it took me to do those short sales.
There is no reason for a bank to take longer than 10 days to approve a short sale. Seriously. But some banks routinely take 3 to 4 months. Some 6 to 8 weeks. And God forbid should a buyer walk away, many start over even though they swear it’s a soft decline, it’s not. It’s a do-over. Which is the dumbest thing ever. That’s ranks right up there with walking through an unmarked intersection blindfolded. It’s just stupid.
Here is a partial list of the banks / lenders this Sacramento short sale agent has closed short sales with, and I’m sure there are more that have slipped my mind. Some, perhaps, on purpose:
- Aurora Loan Services
- Bank of America
- Bayview Financial
- Carrington Financial
- CCO Mortgage
- Citimortgage, now One Main Financial
- Colonial National
- EMC Mortgage
- Flagstar
- First Horizon
- GMAC
- The Golden1 Credit Union
- Green Tree Financial
- Home Eq
- Horizon Bank
- HSBC
- IBM Lender Business Processing (LBPS)
- IndyMac
- JP Morgan Chase
- LCS
- Litton Loan Servicing
- M&T Bank
- Met Life
- National City Bank
- Nationstar
- Navy Federal Credit Union
- Ocwen Financial
- OneWest Bank
- PNC Bank
- Paleco Credit Union
- Saxon Mortgage
- Select Servicing Portfolio
- Seterus
- Specialized Loan Servicing
- Sun Trust
- US Bank
- United Bank
- United Guaranty
- Wachovia
- Wells Fargo Bank
Fannie Mae and Other Things That Don’t Work Right
It seems like I have to fix a lot of things that don’t work right. It’s not necessarily that they are broken as much as it is they simply don’t work correctly. Stuff goes haywire. In fact, I am so used to things that don’t work right that I have become somewhat complacent. I don’t get upset over it. I just fix it.
Almost nary a day goes by when I don’t run into some short sale negotiator telling me the bank won’t authorize seller credits on the HUD. Since when did a bank negotiator become a HUD expert anyway? I realize they don’t know how to read a HUD. If they had to prepare a HUD from scratch, they’d be up a creek without a paddle. Yet, here they are telling me to remove fees that are not credits under the assumption they are correct. They’re not correct. This problem has become so commonplace that I keep a stock answer prepared and ready to email. They don’t work right.
Last Friday my company email went on the blink. Stopped downloading to my computer. None of my settings changed. My email client stopped receiving. The company’s exchange server was not updated or altered. The IT department signed on to my computer to check but they couldn’t find anything wrong, either. We ended up doing a redirect. Because it doesn’t work right.
Yesterday we had to call out an electrician to remove a bulb from a kitchen pendant. We’ve had the pendants fixed twice. Third time they stopped working, we bought new pendants. None of this Lumen’s back-basement discount crap. We ordered blown-glass Oggetti. Then, the darned burned-out bulb got stuck in the socket and a wire connection busted. That’s why it doesn’t work right.
In many Sacramento short sales, I routinely encounter the dreaded Fannie Mae problem with second loans. Now, I heard a guy at DTS admit the other day that they kick out Bank of America Cooperative short sales when the investor is Fannie Mae. He said DTS has had too many problems with Fannie Mae. Because Fannie Mae is a government-sponsored entity, it doesn’t work right.
Fannie Mae has guidelines that are often somewhat restrictive. Like telling borrowers to stop making mortgage payments. Yeah, that’s your government telling you to go into foreclosure. Or, choosing foreclosure over a short sale by refusing to postpone a trustee’s sale. Another involves the payment it will approve to a second lender. Second lenders want to negotiate and try to get more, but Fannie Mae won’t allow it.
Most second short sale lenders realize the problem with Fannie Mae. They tend to get on board. Especially since Fannie Mae rarely makes exceptions. I even had the gatekeeper at Green Tree back down on a second demand a few months ago when I explained that since Fannie Mae was the investor he needed to accept 6% of his unpaid balance. He said: Why didn’t you say so? As though telling him my name was Dorothy would get me into the Emerald City. The system for some second lenders, though, is broken. They don’t work right.
And you can’t fix Fannie Mae.
Photo: Shutterstock
