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The shift from foreclosures to short sales in California continues

It looks as if the foreclosure crisis in California is ending. At the same time, the real estate market is developing a definite appetite for short sales.

Foreclosures in California have dropped to levels not seen since 2006, the real-estate tracking firm DatQuick Reported.

So homeowners finally have a financial leg to stand on, as rising prices and a gradually improving economy have thinned the ranks of people losing their homes.

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Why Do-It-Yourself Real Estate Isn't Wise

I am all for do-it-yourself projects. If you can save a little money and learn how to do something that will be a useful skill in the future...I say, go for it! But not all projects should be tossed into the pool of do-it-yourself (DIY) tasks.

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Short Sales Replacing Mods as New Norm

Among the available foreclosure prevention tools, short sales are becoming the weapon of choice for servicers while the use of loan modifications has slowed, data from Fitch Ratings revealed.

In instances where modifications are not possible, the rating agency explained servicers will look to a short sale, which allows servicers to save by avoiding the cost of dealing with a foreclosure.

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Short Sale Approval and Valuation Issues Continue to Impact Housing Market

Both Fannie Mae and Freddie Mac have implemented policies to expedite the short sales process, including new resources to help determine property values, according to panelists at a property valuation forum during the Realtors® Midyear Legislative Meetings & Trade Expo here.

Short sales continue to represent a significant portion of the real estate market. According to the National Association of Realtors®, short sales accounted for 9 percent of transactions during the first quarter of 2013. 

The short sale process can be frustrating for home buyers, sellers and Realtors® given that approvals are often complex, inconsistent, slow and cumbersome. Tim McCallum, director of short sales at Fannie Mae, said the agency is working to expedite the short sales process. “We are improving transparency and have created a dedicated short sales team to negotiate directly with real estate agents,” he said.

A foreclosure can be postponed if a short sales offer is received in a reasonable amount of time, preferably at least two weeks from a scheduled foreclosure. Fannie Mae created a web-based channel to help agents escalate short sale issues and receive confirmation that the agency is actively working to get those issues resolved.

Bob Martin, vice president of valuations at Fannie Mae, said they have a dedicated team to estimate values for all foreclosed and short sale properties. “To help estimate the values of distressed homes, the team uses appraisals, which are required for all short sales, as well as Broker Price Opinions, and data from other internal and external sources, including current listings, pending sales and sold properties,” he said.

The Fannie Mae valuation team includes 2,000 appraisers around the U.S., who have local competency and produce valuations within three weeks. Sales of comparable properties used for valuation need to be within the past 60 days.

Fannie Mae announced a policy late last year to guide the short sale process for all loans owned or guaranteed by Fannie Mae. Freddie Mac’s policy is very similar, and many larger servicers have comparable programs.

Under Fannie Mae’s policy, after a borrower contacts their mortgage servicer to determine eligibility, the buyer and their agent receive a recommended list price and have the opportunity to respond to the valuation. When an agent submits an offer to the servicer, Fannie Mae may review, and if approved it will proceed to closing.

There are a range of eligibility requirements, but if a borrower is 90-days or more delinquent, and has a FICO credit score under 620, then no documents, hardship or contribution are required to qualify for streamlined documentation. Other borrowers must have an eligible hardship, such as unemployment, reduced income, divorce, death or disability.

Borrowers may qualify even if not delinquent if they are at risk of imminent default and should talk to their mortgage servicer. Owner-occupants who are waived of a contribution requirement receive a $3,000 relocation incentive, less any other assistance; loan servicers may contribute additional incentives.

Mortgage servicers must respond to short sale offers within 30 to 60 days, and Fannie Mae may make a counter offer. Any payments on second loans must not exceed $6,000; if accepted, the borrower is released from any liability for the second loan and may not be required to make a contribution.

Among the requirements, sellers must not remain in the property as a tenant, or later obtain title to the property. Outside of relocation assistance, neither the seller nor the buyer can receive funds or commissions from the sale, and no fees can be paid to a third party to negotiate a short sale with the servicer. 

To date, 37 states have passed AMC legislation, and the remaining states have until 2015 to implement. Although clients and real estate agents technically may communicate with appraisers, many lenders have their own rules.

Ultimately, the Consumer Financial Protection Bureau will regulate AMCs, but hasn’t released any guidelines. In the absence of case history, attorneys are unwilling to offer opinions on operational policy, so AMCs must rely on their own experience and interpretation of the Dodd-Frank regulations.

(Source) -REALTOR News

Short Sale Question: Who Owns the Loan?

The short sale process can be very complex. Every bank and investor has a slightly different program and set of guidelines they follow. Since each investor has different rules and guidelines, it can help you considerably to find out who the investor is before starting the process.

Whether you are a homeowner in need of help with a short sale or an agent trying to help a homeowner, one of the best things you can do is to understand the situation you are getting into. A key piece of this short sale puzzle is finding out who actually “owns” the loan not just who services the loan.

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Porama SrijindaPorama Srijinda, MBA
Broker Associate, REALTOR®,