So you have been working for several months negotiating a Short Sale. The junior liens have been sorted out and the Seller is receiving $12,000 from the lender as an incentive.
You spoke to the negotiator at the Servicer/lender yesterday and they stated the Short Sale was approved and you should have the approval letter in the next 48 hours.
Being the experienced Short Sale Agent that you are you contact your Sellers to give them the good news. They start crying on the phone they are so relieved to hear their ordeal may be close to being over. The $12,000 incentive will be used to move and pay some HOA fees that the lender won’t cover.
Then you send a quick email to the Buyer’s Agent giving them the same info and asking that the Buyer start moving forward with their financing so they are ready to move towards closing as soon as the written approval is received in a couple of days.
Another Short Sale success story. Almost. The following day you log into your email and this is in your inbox:
IMPORTANT MESSAGE ABOUT YOUR LOAN
We have received your request to complete a short sale on your property. We are sorry to inform you that we are unable to approve your request for the reason provided below:
- DECLINE-SERVICE RELEASED.
Oh. No. Say It Ain’t So!!! What now?
Serviced Release loans are causing quite the problem in the Short Sale world. The loan can be Serviced Released at any point prior to the transaction closing. And in most cases you will have the start the Short Sale over with the new Servicer.
Plus the new Servicer may or may not offer an incentive to the Seller. This can be devastating to a Seller who really needs money to be able to move.
We as agents have ZERO control over if and when a loan will be serviced release.
So what can we do? Discuss this possibility with the Seller at time of listing. Be sure they completely understand that everything related to their Short Sale can change up until the transaction is not only closed but the Short Sale lender has accepted the closing documents and funds.
Based on conversations I have had with the lenders about this they usually know 30-60 days out if the loan is being Serviced Released. Be sure to ask your negotiator every time you call if they can check this for you.
The Lender may have the ability to keep a loan from being Service Released where the approval has already been received. But you have to stay on top of it. Escalate if needed BEFORE the loan is Service Released.
A Service Release can be initiated by the Investor or the Servicer/lender. Both may benefit financially.
This is just another in a long line of issues that can derail a Short Sale. Please be sure your customer/client is made aware of this possible issue very early on the process. That’s really all we can do.
What say you?
Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.
Want to find out more? www.CentralFloridaShortSales.com
***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.
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Comments
That's a good question Patricia. I don't know the answer.
Hi, gang. I am a new kid on the block, just approved for membership yesterday. Boy, do I have a lot to learn! I have run into this issue before in a non-mortgage context with Citibank. I didn't quite know what was going on at the time, but with the economy in the condition its in, there is a raging market in all kinds of debt. I am an attorney, but I am definitely not here trying to drum up business; in fact, if you called me to help you with the legal aspects of a short sale I would have to turn you down due to a lack of expertise. Maybe Bryant and Wendy will be able to rectify that. The Citibank issue was that I had a client who owed Sears a substantial amount of money. Apparently Citibank services Sears' debt, and they offered my client a settlement of 25 cents on the dollar. We did the little attorney dance to accept and satisfy their offer, and a couple of months later my client got a letter "thank you for your payment on account, your remaining balance is...." When I called them, their answer was that they no longer owned the debt. At the time I thought it was simply another Wall Street scam, but reading Bryant's "Service Released" article has given me a different perspective on this transaction.