Loss Mit Services

Not all Mortgages Qualify for a Short Sale

Posted on 06. Apr, 2018 by ctlms in Blog, Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

Not all Investors will agree to a short sale.

Things are constantly changing in the world of short sales.  These days, since the expiration of the Home Affordable Program, in 2016, change seems to be a constant theme.

One of the ever growing trends over the last few years has been Delinquent Loan Sales.  This is when the Investor that owns the mortgage, takes a large number of delinquent loans, pools them together and auctions them off to buyers of bad debts.  Usually, these are multi-million dollar pools of loans.

Fannie Mae, Freddie Mac, and even FHA are selling off delinquent loans these days.

Once that loan is sold, the rules change.  No longer are the rules for loss mitigation dictated by the prior owner of the loan.  This new Investor that owns the loan, dictates the rules. Usually, this will also result in a servicing transfer.  This is where the loan is transferred to a different company to service it on behalf of the new investor.  The buyers of these bad debts specialize in buying delinquent accounts.  They of course, pay less than the amount owed to acquire those loans.  And they often send them to be serviced by servicers that more like debt collectors, than they are like mortgage servicers.  This means reps at the bank tend to be less cooperative and rude.  This can make for a more difficult short sale transaction if one is even allowed.

Some of these new Investors are actually not allowing short sales at all.

It does not matter what the offer is.  Unless they are being paid in full, they will not accept an offer on the property.  So far we have seen them be willing to consider a loan modification, or a deed in lieu of foreclosure, but not a short sale.  This still leaves options for the homeowner to avoid foreclosure.  But if they don't know that a short sale is not possible, and market the property for several months, only to then find this out, it may be too late for one of the other options.

So determining if the current investor that owns the loan will consider a short sale, is crucial at the beginning of working on a short sale.  Though this can be a little difficult.  Some servicers will come right out and tell you that this investor will not consider a short sale.  Which is in everyone's best interest to know up front.  However, not all of these servicers are so open.  Some will refuse to tell you who the investor is and will refuse to tell you anything about what they will or will not consider for a workout option.  They want the homeowner to fill out a complete workout package first.  Then they will spend the several weeks to months it takes them to review that, and come back and let the homeowner know what options are available.  For those servicers, we have to use some legal rules to request the investor information in a format that they have no choice but to respond to so that we can determine who the investor is.  We know who is not allowing short sales.  So if we find out the loan is owned by them, we are able to tell the agent and the seller this information so they do not waste any more time thinking a short sale is possible.

We have unfortunately seen a few cases where we were contacted after there was already an offer on the property.  We then learned the investor will not consider any offer.  Obviously, no one was happy.  Best to find this information out before there is a buyer in contract.  This is the reason for this article.

I want agents to know that not every property qualifies for a short sale these days. That information needs to be determined early on to avoid going too far along on a lost cause so the homeowner can look into other options before foreclosure gets too close.

Luckily this has been a pretty low percentage of the files we see, and we see a lot of files.  But it is happening and we have seen close to a dozen of these already in 2018.  Most of which we were able to determine before an offer was received on the property, since determining the investor on the loan has always been one of our first priorities for new files anyway.

In conclusion, whoever is working on the short sale negotiations needs to determine who the investor is that owns the loan, and ask the servicer if they will consider a short sale.  This should be done at the very beginning, preferably before the property is listed for sale, or at least as soon as possible after it is listed.

Sean Wilder

Loss Mit Services

Who owns your mortgage? Probably not your bank!

Posted on 02. Jun, 2017 by ctlms in Blog, Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

Who owns your mortgage?  And Why does a Short Sale Take So Long?

Many homeowners I speak with do not understand how the mortgage industry works and the players involved.  So let's talk about it.

Let's start with a typical mortgage origination scenario.

1. A Home-buyer goes to ABC Bank and applies for a mortgage. For this example, let's say it is a conventional mortgage.

2. ABC bank is a large, regional or national bank.  They underwrite that loan so that it meets Fannie Mae or Freddie Mac standards. This makes it possible for them to sell the loan to Fannie Mae, Freddie Mac or some other Secondary Market Investor, after the loan is originated.

3. The loan is approved and closes.  ABC Bank takes their own money, or money they have borrowed, and lends it to the Home-buyer.  They charge him an Origination fee for creating the mortgage.

4. ABC Bank then turns around and sells that loan to a Secondary Market Investor, and hopes to keep the Servicing Rights.  That means, they still send the new Borrower their monthly bill and collect the payments, etc.  For this, they get paid a monthly servicing fee.

But now ABC Bank has that money back that they loaned out.  So they are able to do this same activity over and over and over collecting more and more Origination Fees and Servicing Fees.  This is how most Mortgage Companies make money on mortgages.

So now the loan is seriviced by ABC Bank, but even though they originated it, they no longer own it.  The new owner of that loan is called The Investor.  If that loan needed mortgage insurance, there is also a Mortgage Insurer involved with that mortgage.

So this leads me to the following question that I get all the time... "Why do the banks take so long to review a short sale and make a decision?  Don't they want to get this resolved asap?" The answer is that they don't necessarily want it to be resolved asap.  That is because there is a conflict of interests between the Servicer and the Investor.  The Investor is the one losing the money, and possibly the Mortgage Insurer.  So they have an interest in potentially resolving a delinquent loan sooner rather than later.  But the Mortgage Servicer is being PAID every month to service that loan.  Once that loan is closed out, that income will stop.  So the Servicer does not have an incentive to make the process fast and efficient.  So long as the Investor on the loan is not unhappy with their current timelines and servicing of the loan, then the bank has no incentive to spend money to better train their staff, streamline the process, or hire more staff to handle to volume of files they have to review.  So nothing changes for the better, even so many years after the initial downturn that caused the real estate crisis to start.

Sean Wilder

Loss Mit Services

Beware the Vacant Short Sale

Posted on 26. May, 2017 by ctlms in Blog, Foreclosures, My Blog, News, Real Estate, Short Sale, foreclosure

What to look out for with a vacant short sale.

There are things to look out for when your short sale is a vacant house.  There are processes the lender will take that the seller and agent should be aware of.

The vast majority of the short sales we negotiate are on mortgages that are no longer current on payments.  Once the loan is delinquent the mortgage servicer is going to start certain processes that they are required to do.  Collection calls and letters are obvious actions they will be taking.  Eventually they will also start "soliciting" the borrower to apply for assistance.  This means sending them an application package and encouraging them to complete it and send it back to be reviewed for a loan mod and other options.

Vacant Properties have their own concerns.

Another process the servicer is going to do is to start checking on the property.  Somewhere within the first 90 days the bank is going to send a property preservation contractor to the property to see if it looks like it is occupied, being maintained, or vacant.  If the property is occupied, you may hear from the homeowner that they saw someone walking on the property or taking photos.  They may even peek in the windows.  This contractor is looking to see if the property is abandoned and they are taking photos for the report that they have to submit.

If the property looks vacant, the contractor will usually leave a door hanger or put a stick on the door that says something like "This property is believe to be abandoned.  If this is not the case, call you lender immediately at 555-555-5555".  If the property is not vacant, the homeowner will want to call and let the bank know that is not.  If the property is vacant and the homeowner is maintaining it and checking on it, they would want to let the bank know that also.

If it is Vacant, expect it to be Secured.

If the property is vacant, even if the homeowner is maintaining it, expect that the bank will "Secure" it.  Secure it means breaking in, changing the locks on at least one door, and usually winterizing it.  Even in warm weather months, it is not uncommon for them to still winterize it.  The lender has the right to secure the asset that is collateral on the loan against damage or loss of value.  So they will do that.  Their concerns are things like burst pipes and water damage in the cold months.  But even in the warm months, vandalism and damage due to stolen copper pipes are concerns.

So do not be surprised to show up at the property to find the locks changed and either no lock box or a different lock box than the one the agent left at the property.  Typically the agent's lock box will be found inside on the floor, still attached the the door handle that was removed and replaced.  Even if there is a real estate sign in the yard, it is not common for the preservation company to call the agent to ask about the occupancy or let them know they will be securing it, though it does happen sometimes.

The bank cannot lock out the homeowner.  So we or the homeowner are able to get the new lock box code or a copy of the keys.  The main reason they changed the locks was so that the preservation contractor has access to the property for routine checkups on the property in the future, without having to break in again.

Beware the Preservation Contractor!

The companies that are hired for the property preservation work are not licensed, or regulated in CT and many other states.  Many of these companies subcontract out the inspections and actual securing of the property.  There is little to no oversight or accountability.  Due to these facts, some of the shadiest people you will meet are involved here.  I have seen many instances of theft, vandalism, and shady actions by these companies.  I have seen properties secured that were obviously occupied.  Only for the occupant to come home and not be able to get in.  I have seen MANY things stolen.  I have seen utilities turned off in the middle of winter, but no water drained from the pipes.  I have seen doors and windows left wide open, presumably for someone else to come back after dark to steal from the house.

So what to do?

For the homeowner: If the property is vacated by the homeowner and the payments are not being made, they should move out all of their belongings.  Do not consider the property to be a good place to store belongings until closing.  Things will disappear once the property is secured and if they call the Police they will be told this is a civil matter, not criminal.  The bank has no accountability or oversight over these companies and does not care about any of this.

If you see that the property has been secured, check it out.  Did they turn everything off?  Did they drain the water?  Their incompetence may have put the property at further risk of damage, rather than reduced the chances as the banks intend.

For the agent: If the agent sees a sticker on the property or gets a call from a company that says they are going to secure the property, I would either remove the lock box or try to put it somewhere other than the door handle that would be changed if they changed the locks.  No one likes losing a lock box, especially the electronic ones.

This is all something to be aware of and keep in mind when dealing with vacant properties and delinquent mortgages.

Sean Wilder

Loss Mit Services