I've been seeing more servicers force a loan modification review on my short sale clients. I mean clients that have no interest in retaining the home, haven't asked for a mod. This wouldn't bother me a bit, if they didn't stop the whole short sale review. I've even had deals where the negotiator is assigned to review the short sale...then next status check oh, sorry no negotiator, you just have to wait.

Clients write and call in that they want a short sale, not a loan modification, but still it takes three weeks to get them back to reviewing the short sale. Is anyone doing this better than I am?

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Yes, though usually if the seller asks not to be reviewed it isn't an issue. I'm having them take 3 weeks just to acknowledge the seller's request and move the file back to short sale status.

There is a "Waterfall" that lenders will typically follow:

Repayment Plan
Forebearance
Modification of the mortgage
Short Sale
Deed in Lieu of Foreclosure
Foreclosure

Add to this mixture are the investor guidelines. Some investors will not allow any sort of modification, including short sale.

Add yet another layer, that of the FHA,V.A.,USDA, Freddit Mac, Fannie Maeetc., each with their own guidelines, and you've got a headache of near epic porportions.

One key pre-qualifying question l would ask, would be if the homeowner knew what their lenders guidelines were. If they didn't know, l would get a signed letter of authorization from them ASAP. It would save a lot of time and stress.

Ron; 

 

Deed in Lieu of Foreclosure is seen by lenders, BoA specifically (I worked on loan mods for 4 years.)as the step below full blown foreclosure. The reason being that it is least costly to both the homeowner, in terms of possible repayment and credit scoring issues, and the banks due to the legal fees etc. that will be hit. They, the lenders, will take a greater loss with a foreclosure.

 

In any event, most lenders will require that there be a verifiable form of hardship before considering either a loan modification or a short sale.

 

Here's a question:  Given the small rise in interest rates, and the slight increase of housing prices, would it not be possible to put the property on a full blown sale, rather than a short sale?

 

Ron Scribner being sarcastic? Never :)

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