Well, someone in government has been listening to the chorus of complaints about lenders taking too long to make short sale decisions. In a rare move of federal government housing competence, the Federal Housing Finance Agency has instructed Fannie Mae and Freddie Mac to impose new guidelines which should accelerate short sale decisions. The new rules require that short sale lenders make a decision on a short sale within 30 days of a complete application, and if more time is needed, they must give weekly status updates. The new requirements go into effect June 15, 2012.
How much of an impact this will have on Massachusetts and Connecticut short sales remains to be seen. Freddie Mac has jurisdiction over a small percentage of short sales, mostly HAFA short sales as well as a limited number of traditional short sales, totaling about 45,000 last year. (Bank of America did over 150,000 short sales last year, by comparison). This is certainly a step in the right direction, and will hopefully lead to more regulatory pressure on the big banks to speed up short sales.
I asked expert short sale negotiator Andrew Coppo, of Greater Boston Short Sales, for some commentary on this development, and unfortunately he has a more tempered reaction: “It is no secret that both lenders and loan servicers have made continued efforts during recent months to vastly improve their short sale approval time-frames. I think it is important to note that the new Freddie Mac regulations don’t include any penalties or sanctions for loan servicers or lenders who fail to comply,” Coppo said. “What’s more, the new rules appear to only require short sale lenders to make a decision on a short sale within 30 days of a complete application, otherwise they need to send weekly updates. Most lenders will simply comply with the new requirements by sending out a weekly letter stating that the file is incomplete and request more short sale documents from the homeowner [and most lenders already do this]. Lenders could also comply with the new rules by simply making an unreasonably high counter-offer.”
Coppo points out that “what most people fail to realize is that most lenders, such as Bank of America, Chase, Wells Fargo and GMAC all utilize an automated short sale processing software, known as Equator, that enables them to approve a short sale in as little as 30 days. The majority of short sales that take more than 60 days to get approved do so because the person submitting the paperwork fails to submit a complete package or the lender “loses” a portion of the submitted paperwork. While the new guidelines are a step in the right direction, without any sanctions or penalties I don’t see them having much of an effect on the time in which the lenders and loan servicers process short sale requests.”
Coppo’s insightful analysis reaffirms why it’s so important to use an experienced and savvy short sale negotiator to close short sale transactions. It makes all the difference in the world.
