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Major Bank Settlements Pay Cash for Short Sale
Can you get money for doing a short sale with Bank of America, Chase, Wells Fargo or Citimortgage? That’s most likely the question in the minds this morning of many past, present and future short sale sellers. You might get enough cash to take a French Polynesia vacation, you never know. The New York Times reports payments as much as $125,000 to reduce principal balances could be offered as a result of these bank settlements. And the bank I see paying out the most in Sacramento is Bank of America on those Cooperative Short Sales. Yup, banks will pay cash for short sale.
Remember way back when, when this Sacramento short sale agent suggested that Bank of America was actively dumping those old Countrywide loans? It seems I was right on the money with that call. If I spotted a Countrywide loan in a short sale, on that hunch alone, I routinely directed the seller to a Cooperative Short Sale. Never had a Cooperative that way rejected. I have probably initiated more Cooperative Short Sales on my own through Bank of America than any other short sale agent in town.
I recall one instance in particular. I was dealing with a third-party vendor, either REDC or DTS, don’t recall, there are so many. This particular third-party vendor was telling me we had to do a HAFA, and I insisted, no, it needed to be a Cooperative Short Sale, even though I was going out on the limb a little with that demand.
I was driving through Midtown Sacramento with the top down on my car, so it was hard to hear the caller on my Jawbone, but we argued for a good 14 blocks, all the way from J Street to Broadway. Finally, I suggested she call her supervisor to discuss because I didn’t want to hear from her again about a HAFA when this short sale was destined to be a Cooperative. Sure enough, a day or so later, the bank switched to a Cooperative despite the negotiator’s initial objections. That seller received more than $10,000 to do the short sale and no documentation was required. It can pay to disagree with an individual’s assessment. Because individuals aren’t always right.
For months, Bank of America has been releasing servicing. Sometimes, the service release happens smack dab in the middle of a short sale, which is a rude awakening. The bank needs to pay Fannie Mae $11 billion and needs to get that money somewhere, so it’s dumping its loan portfolios. Part of the problem with that is it’s reducing competition among lenders if Bank of America withdraws from the mortgage market. When competition is reduced, it hurts consumers.
It will be interesting to see how this all plays out. If you’re looking to see if you could be a lucky recipient of cash for a short sale, call this Sacramento short sale agent and I’ll check it into for you.
Photo: Flower of Tahiti, by Elizabeth Weintraub
Beware of the Short Sale Service Release
When writing to another agent today about short sale service releases, it made me realize how little the average consumer knows about this practice. A service release happens when a bank sells the servicing rights for a loan to another bank. Some banks are the actual investor, the entities that own the note, but many banks are nothing more than a collection agent for the loan. The bank takes the money from the borrower, pockets a fee for its services, and then distributes the rest to the investors. It has other duties outlined in the PSA such as handling the foreclosure, which pays the bank even more money. That’s one of the reasons why some banks can prefer foreclosure to short sale.
Bank of America seems to be in the middle of a big sell off. It is selling servicing rights to other banks. At first I thought maybe it was Fannie Mae who fired Bank of America, but it seems to be the other way around. In one such Sacramento short sale, we had put a pre-approved Bank of America Cooperative Short Sale into escrow. The seller had signed the Borrower Acknowledgement of Interest — known in short sale lingo as the BAI. This is not a commitment on the part of Bank of America but most people take it as such.
The short sale progressed smoothly, as most Cooperative Short Sales do these days. We received the counter in Equator, which removed a few miscellaneous fees from the purchase contract that Fannie Mae would not allow. Usually, when we approve the counter offer, we get the short sale approval letter anywhere from 24 hours to 10 days later. Instead of receiving the approval letter, though, we received a decline of short sale because the bank had sold the servicing rights to Seterus. Our old friend, IBM.
Seterus does not Cooperative Short Sales. Seterus does traditional short sales. Long story short, Seterus rejected the short sale. The seller did not receive her $3,000 relocation incentive. The buyer did not buy the home. The entire transaction blew up, and there was nothing we could do about it. The home went to foreclosure. If you don’t think service releases produce horrific results, here is one for the record.
Bank of America Cancels a Short Sale
This Sacramento short sale agent spotted a freaky warning in Equator yesterday about how Bank of America cancels a short sale. It’s a Cooperative Short Sale. My seller is receiving more than $10,000 to do this Sacramento short sale. It’s been smooth sailing for her from day one — no financials, no hardship letter — and the docs are in title, knock on wood. The warning was from Dignified Transition Solutions (DTS) and read: LOANS ARE MORE FREQUENTLY BEING SERVICES RELEASED FROM BANK OF AMERICA, WHICH WOULD VOID THE DEAL. This means exactly what you think it means. It means that even though we have short sale approval and are about to close escrow, Bank of America can cancel the short sale.
The buyer has completed all of her home inspections. She paid for a lot of inspections, too: roof, chimney, general home inspection, pest report. Yeah, yeah, I know what you’re thinking. You’re thinking so what, the buyer does not have a contract with Bank of America. The buyer has signed a purchase contract with the seller, and that purchase contract is contingent upon bank approval of the short sale — even though it is a preapproved Cooperative Short Sale, the bank still needs to approve the purchase offer.
Yet, you probably wonder how can Bank of America cancel a short sale? The bank is not the investor. This is the little known but all-important fact in most short sales. Often, the bank is only the servicer, it services the loan, collects the payments (or non-payments) and disburses the money on behalf of the investors. Investors are increasingly pulling that servicing from Bank of America.
I had another Bank of America Cooperative Short Sale yanked by the bank right after the Equator counter offer. Here, we were waiting for what we so innocently presumed would be the short sale approval letter when we were abruptly notified that Bank of America was no longer servicing the loan. It had been transferred to our buddy, Seterus. Which was once, believe it or not, IBM. What a sad graveyard for typewriters and a former technology giant. We started the short sale over from scratch with Seterus. No cash for this seller. No guarantee the short sale will be approved again, either.
Another Cooperative Short Sale at Bank of America is destined for another servicer as well. We went back to the bank negotiator to ask for a short sale extension and were informed the file was being held, pending a servicing release. At least the bank had the decency to hold this pending release but it’s also now being released. This investor is Fannie Mae. I don’t know who the other investors are in my other Cooperative Short Sales — just that those investors are not a government sponsored entity (GSE) like Fannie Mae. That information is unavailable. I do know that we have Fannie Mae saying: Adios, B of A. And don’t let the door hit you in the butt.
Still, the question is how can Bank of America cancel the short sale just before closing? Like with most things, the answer lurks in the legal documents. In the short sale approval letter, Bank of America says, “We may terminate this agreement at any time if we have evidence of: blah, blah and
“The transaction does not comply with our requirements, policies and procedures.”
If Bank of America is no longer the servicer, you’re hosed. So, the moral of this story is it ain’t over until the fat lady sings. Until you close escrow, that Cooperative Short Sale at Bank of America could be at risk.
