It’s something that’s hard to quantify because there are still plenty of horror stories in which a mortgage servicer took months longer than expected to decide on an offer, and the prospective buyers wouldn’t wait or couldn’t agree on a price.
But there is some numerical and anecdotal evidence that some servicers have grown more interested in approving short sales.
Through June, 10,438 homes nationally were sold under the government’s Home Affordable Foreclosure Alternatives program by servicers, and another 316 were returned to lenders in a deed-in-lieu-of-foreclosure arrangement, according to the Treasury Department. That’s a 25% increase over the previous month. Meanwhile, the number of Home Affordable Foreclosure Alternatives agreements begun increased 20%.
Through their own programs as of May, the 10 largest mortgage servicers had completed or were processing more than 30,000 short sales and deeds in lieu of foreclosure for home owners whose government-backed mortgage loan trial modifications were canceled and almost 82,000 other short sales and deeds in lieu of foreclosure for home owners who weren’t accepted for trial modifications.
Individuals whose bread and butter is short sales say they’ve noticed the improvement.
Ever since the beginning of the year, banks have worked to streamline the process, and offers are getting responses in 60 to 90 days in some cases, said Nicole Fabiano, founder of Home Solutions Inc., a company that works with buyers and sellers in short-sale negotiations. Of the last 100 short sales Fabiano’s worked on, only three were through the government program; the rest were in-house deals.
In a short sale, a home owner, with a lender’s consent, sells a property for less than the amount owed on the mortgage. While the process has been around for years, its use has taken off in recent years as a way for delinquent borrowers to avoid foreclosure. Other sellers seeking short sales are those “upside down,” meaning their mortgages are higher than the value of the underlying real estate.
A property that sells in a short sale is likely to net a better recovery for the bank, and the bank is not subjected to the drawn-out expenses associated with a foreclosure. That’s certainly an issue in Illinois, where courts handle foreclosures, and the process can take an average of 300 days.
But short sales take time, as well, particularly if the property is listed at a price unrealistically below market value that the lender is unlikely to approve.
Kimberly Wirtz-Prince, a Century 21 Pro-Team agent, said she thinks all parties involved in short sales are getting the knack of how to do them. But she still tells prospective buyers to not expect to hear back from a mortgage servicer for three to four months.
One of Wirtz-Prince’s listings, a short sale in Tinley Park, returned to the market this month, and it was the second time the town home had to be relisted since it was put up for sale in March 2010. The first time around, a prospective buyer walked away from an offer, and the property was relisted. More recently, the town home came back on the market after a prospective buyer had not heard back from the bank in four months.
“The ones that get approved before 90 days, they do happen, but you have to have buyers locked into a worst-case scenario,” said Theresa Panzica, a Chicago lawyer who works with sellers and buyers in short sales. “The reason deals fall apart is because of buyers, not the banks. Banks are approving these things. (The issue is,) are the buyers going to wait?”
Low interest rates may be causing existing home owners to call their mortgage bankers, but demand among home buyers remains soft, and the lending industry’s trade group doesn’t see that changing next year.
The Mortgage Bankers Association estimates that mortgage originations in 2012 will total about $931 billion, the lowest volume since 1997 and a $30 billion drop from its previous estimate. This year, the trade group said, mortgage originations will reach $1.1 trillion, about $100 billion more than its earlier forecasts and largely because of refinancing demand.
Source: Mary Ellen Podmolik, Chicago Tribune