Fannie Mae short sales: Making things harder than they should

So the good news is we just closed a short sale listing from Queen Creek at the beginning of the week. More good news is this short sale was not a cat because if it only had nine lives, it would be dead.

We took the listing in May of 2010 and by the time we got an offer that would stick it was mid-July. The BPO came back at $131,000, right about where we thought it should be. Even thought he buyer had only waited for less than five weeks, they had found another house so back to the market the house went. The problem we were facing with this area of Queen Creek is it was probably the most rapidly declining area of the East Valley.

We got another offer in October, and because this is a Fannie Mae short sale the original BPO should have been still valid and with an offer of $120,000 we knew we would have to work some magic to make this happen or challenge the BPO. But for some reason, they ordered a new BPO, and in this rapidly declining market the number came in at $152k. 152k? Someone used some bad comparables. I usually meet the BPO agent at the property as I did this time, but this BPO agent would not allow me to even talk to him, so there was nothing we could do to make sure he was looking at the same info I was.

The buyer was not willing to work with us as we fought it, so they walked too and back to the market we went.

The first week of January I get an offer for $117k, which was about market value, and they were willing to wait while we challenged Fannie’s BPO.

Of course Fannie would not make it easy and just look at the comparables we were providing and see the obvious. They refused to look at value. We escalated in Bank of America to try to get them to help us fight Fannie Mae. Again we were told no Fannie would not take a look at value.

After we were told at least 5-6 times by a variety of people that Fannie was refusing to even look at value, we eventually found someone in the escalations department who realized we were right. How could values go up 20% in four months? If the comparables sold in the last three months were 95k-130k, with only one above 117k, how could ours be worth 152k?

But again even though she was working on making the case to Fannie Mae, they would not look at it. Finally as a last ditch effort I started calling every manager and executive at Fannie I could get a number for, and they all refused to talk to me saying I needed to go through the servicer. Then I blasted them all with emails outlining my case. I was so aggressive in my contacting that Fannie Mae called my escalations contact at Bank of American and yelled at her telling her I had to stop contacting them. That meant I was doing my job.

Eventually all my harassing of Fannie Mae paid off and they agreed to do a new BPO, which came back at $122k, right where we thought it should. So we wasted hundreds of man hours and two months of time, but we were making progress. Of course there were issues with cash contributions and promissory notes that I will discuss tomorrow, but we would eventually get an approval letter and they gave us only 5 days to close. Of course they had to make that difficult to and it took two days on the phone to get them to eventually extend it two days AFTER the letter expired.

Fannie Mae needs to find a better way to work with agents and/or servicers. Eventually they would agree with everything I say, but they took months and hours of time to get there. If they had been able to use their brain, it could have saved a lot of time and money.

Chandler short sales a lot like Chandler weather

The weather in Chandler Arizona is in my opinion the best in the country. Here in Chandler it is sunny an average of 330 days a year. This morning when I woke up was one of the other 35 days a year as it was windy, dusty and about to rain. So while the weather in Chandler is great, it is not perfect.

Just like the weather, even with the best short sale agents things will not work out 100% of the time. The industry average of short sale closings is close to 40%. The best agents will close somewhere between 80-90% of their short sales. If any agent tells you they close 100%, RUN. They are either lying, have lost their mind or have not done enough deals.

There are reasons that short sales do not pan out that are sometimes out of the control of the listing agent. But while no one will close 100% of their deals, there is still a big difference between those closing 80-90% and the industry average of 40%.

The reason some agents close 85% while other agents close less than 30% is a combination of experience and understanding that every no is just one no closer to getting a yes.

Chandler short sale phrase of the day: managed chaos

Managed chaos, this is the word or the phrase of the day. When you are doing a short sale whether you live in Chandler Arizona or anywhere else, your short sale agent is going to need to know how to manage chaos. That is exactly what a short sale transaction is.

In a short sale transaction you have the buyer and buyers agent, listing agent, investor, servicer, servicer escalations department, MI company all wanting the best deal for them in the time frame they want, which is usually now. Everyone involved is going to be saying no a bunch of time, threaten to pull out or not approve it and eventually you get the approval letter then Fannie Mae wants you to close in five days.

There are so many road bumps and obstacles to overcome in many short sales that to an outside observer or anyone but the short sale agent it probably seems like chaos. The thing is, to the agent who is doing this every day and in the trenches it is chaos, but managed chaos.

We anticipate these problems are going to come up. We know what is normally going to happen next and prepare everyone involved. We have a plan on how to deal with these issues and know how to get around when a new issues arises. The key to a successful short sale is knowing how to expect the unexpected and managing the issues when they explode. And they will explode.

HAFA: Sorry Alex and NAR, still not a game changer

HAFA… you heard me talk about it before A year ago, the day it was announced. The same day I said it would not work. There there was nothing in it that was realistically going to make a change.

In October of this year I reported that only 342 HAFA short sales had been closed in the first six months of the program. Not exactly stellar results or a game changer for the short sale industry as some “experts” and NAR claimed it would be.

Now there are new changes to the HAFA program.

The first change to the HAFA program is servicers are no longer required to verify a borrower’s financial information to determine if their debt-to-income ration exceeds the 31%. This sounds great on paper, but most of the homeowners who are looking for a short sale I have seen already had debt-to-income rations above 31%.

As far as the second-lien goes, there was a change there too. Originally the second-lien investor had to agree to accept 6% of the unpaid balance owed to them up to $6,000. The new guidelines eliminates the 6%, but still keeps the $6,000 cap. This could actually help a little, but I don’t think it is going to make much of a change. Many of the second’s are still not going to agree to this unless the same investor owns both liens.

So with these changes again I give them credit for trying, but if the government really wants to make programs work they are going to have to get those who are in the trenches involved in suggesting changes.

I don’t expect much of a change in the HAFA program. The approval rate may go up 100%, but that is still going to be a tiny percentage of all short sales that get approved. Sorry Alex and NAR, this is still not a game changer.

HAFA: What has the success rate been? The numbers are out

It was almost a year ago that HAFA was announced, and the day after it was announced I called it a joke. They did make a few changes on the things I complained about before it officially launched seven months ago. But the numbers are out on the first six months and and guess what? HAFA is still a joke.

There have been 342 HAFA short sales in the first six months in the United States. That means each state has an average of 7 HAFA sales or deed-in-lieu of foreclosures a month. SEVEN!

Still think HAFA is a game changer Alex?

For Chandler short sale agents, look to mules for inspiration

Today is national Mule Day. When it comes to Chandler short sales your agent need to be a stubborn as a mule sometimes. Not taking no for an answer and not giving up.

Foreclosure sensationalism: Blame the media, not the banks

Have you followed the sensationalism with the foreclosure hault? It was all over the news. The evil banks were foreclosing on all these innocent home owners they should not have been foreclosing on. Well it turns out after a review of files, the foreclosures were justified.

Bank of America short sales: Halting foreclosures for now

Bank of America has announced they are halting foreclosures in all 50 states… for now. Don’t expect this to last to long and if your short sale is facing foreclosure soon make sure you are working the deal because as soon as these are released it could be foreclosed on at any time.

Fight for clients in short sale approval

Not every short sale is going to close, no matter how good you are. Often times issues like PMI are going to get in the way. But you should be taking the fight to the bank for your client to get the deal done and sellers when interviewing agents make sure you ask them what they are going to do when the bank says no.

But I don’t have PMI?!?!

So you purchased your East Valley home with a 80/20 loan so you would not have PMI. Now you need to sell your home and you find out the PMI company is asking for a cash contribution or a note for $10,000 to be signed. Why is that?

Well it turns out that investors who purchased your mortgage didn’t trust you so they purchased PMI for them. That is all well and good, and allowed, but that PMI company is not allowed to ask you for a contribution. Well they can, but they are not supposed to.

When they do this it is called 3rd party bad faith. The problem, even through you are right it is going to be more expensive to fight it than just pay it. I think this is going to end up leading to a class action law suite.