Replies to This Discussion

Permalink Reply by Jeff Payne on January 31, 2012 at 7:08am

FHA says that the seller does not qualify if they are not delinquent but I believe that there are some here that have gotten them approved with imminent default argument.

Permalink Reply by Bill Somerset on January 31, 2012 at 7:09am

I have seen this recently.  Not with BOA however.  WF was the servicer on the last one and told the borrow they needed to be 30 days late in order to participate in a SS.  Of course, by the time it was approved and we closed, they were 60-90 delinquent, but they closed and deficiency was waived.  Non payments of course effected FICO score.

Permalink Reply by Jeff Payne on January 31, 2012 at 7:15am

Bill, I have done them with BofA and Wells recently.  Remember that everything is negotiable and if it is in the banks interest to do so, they will approve a current seller

Permalink Reply by Andrew Arild on January 31, 2012 at 7:12am

All,

I am very interested to hear what everyone is experiencing with getting short sales approved for borrowers that are current and not in default. I know an agent in California that has two in process right now and it remains to be seen if they will be approved.

I was forwarded an email from a lender advertising immediate ability to be approved for FHA financing after a short sale closes provided that the borrower had no mortgage lates in the prior 12 months. My reasearch with all of the major lenders seemed to indicate that most expect the borrower in an short sale to be in default as part of the hardship however I did find some non-specific language that indicates it may not be 100% required. Needless to say this has created concerns.

MY primary concern is liability for agents that are listing short sales and recommend that the seller stop making payments in order to obtain approval. If that is no longer required and the seller experiences serious credit issues, agents can be on the hook for damages associated.

If you have any information for a specific lender that allows or provides short sale approval for borrowers that are current, please share that information here.

Thank you all for making this a great forum.

Andrew

Permalink Reply by Jeff Payne on January 31, 2012 at 7:20am

Andrew, one of the most misunderstood items with short sales is that not all sellers are in default or behind on their payments.  I and many here have closed many short sales with sellers who are current. Many are asked for a contribution to the sale but not all.  Not sure where you did your research with most major lenders because I have closed many with most of the major lenders and seller was current; Bank of America, Wells Fargo, Chase, Citi, US Bank......

As far as agents recommending seller stop making payments, I HIGHLY doubt that many here are doing that as it is irresponsible.  Most of the time the lender might try to tell the seller that they need to miss a payment but most agents who are good at short sales are not going to do such a thing.

the only information I have is experience that lenders can and will approve sellers who are current.  Been there done that.

Remember that the person at the bank is called a negotiator or loss mitigator and their job is to negotiate

Permalink Reply by Eric S. Garrison Waterboro, ME on January 31, 2012 at 7:37am

Jeff,

 

agreed I would HOPE anyone on this forum would NEVER suggest their clients miss a payment! I stress this to my clients that I would NEVER suggest this - in writing if I have to! lol I wonder if it is just in the negotiator's script to keep puching and suggesting the seller be late? With this one I initiated this convo on, they are apparently going to process this for short sale, but just included that statement again while collecting documents. BofA's help team also quoted that as part of Ginnie/USDA guidelines.  

Permalink Reply by Michael Hayley on January 31, 2012 at 7:32am

I think you are wasting your time until your client is 30-days late. It is a fact of life: if Mr/Ms. Homeowner want the lender to write off a portion of principal owed, you have to at least suffer the consequences of being late on the mortgage on the credit history. 

I agree with Jeff that how an agent tells the homeowner these facts is a delicate matter for compliance reasons, but that doesn't change the truth. I think the odds of success are much weaker in a short sale if the homeowner is current on their mortgage. 

Permalink Reply by Eric S. Garrison Waterboro, ME on January 31, 2012 at 7:42am

Michael,

Jeff never said anything like that that I read? He in fact said

" I and many here have closed many short sales with sellers who are current"

Permalink Reply by Jeff Payne on January 31, 2012 at 11:31am

Sorry Michael, that is just misinformation, respectfully.  It is not a waste of time at all.  Tell the soldier with a high security clearance that you can't help him because he is not late but he was transferred to another military base.   Why would he have to suffer the consequence of beign late?  Sorry but I completely disagree that anyone should have to suffer the consequences of being late in order to qualify for a short sale.

We close them regularly with homeowners who are current.  No need for them to be late, just need to show a hardship. 

I know this is your opinion and I respect it but the last statement " I think the odds of success are much weaker in a short sale if the homeowner is current on their mortgage. " is really just limited thinking.

Permalink Reply by Dean E Eshelman, CPA, CDPE, IRES on January 31, 2012 at 8:59am

Down right makes me angry that the statement is made by a loan servicer that the homeowner needs to be 31 days deliquent if they are current. First the rep that made this statement needs to be reported to his boss and inparticular to the OCC and the Federal Reserve.

We have a Housing Task Force in our area (Jefferson County, MO) and have a meeting scheduled with the VP of the Federal Reserve next week to discuss issues. This certainly will be a topic of discussion. In fact my opinion is these statements may be in violation of the April 13, 2011 Cease and Desist Order. That determination can only be made by filing a complaint.

Permalink Reply by Jeff Payne on January 31, 2012 at 11:32am

I agree Dean,  the way to handle it is to record the conversation in which the lender or sevicer suggest the homeowner miss payments.  See how they handle it then