Short sales still taking a long time to process

On 28.Feb.2011 in Blog, Books & Manuals

Ken Lawson, JD

Some time ago I read an article in the Mortgage News Daily about stories of woe over the delays of short sale approvals or rejection, the inability to talk to the negotiators, and a stated frustration over spending a couple hours a day trying to push the lender for a decision.

The delays then were a reality…and it still is. It isunderstandable that agents, sellers, and buyers are frustrated over those delays. After all, it is difficult to get a buyer to wait for months for approval, many walk away before then. However, I have a close relative and friends who are top executives in nationwide banks and secondary market investors. The delays became a reality because they have experienced a coming together of two major impacts: exponentially increased numbers of short sale proposals caused by the housing and mortgage collapses, and severe financial crises forcing many of them to teeter on the edge of bankruptcy. Indeed some of them have been forcibly nationalized by the government, taken over by other banks, or dissolved. Those remaining have inadequate personnel to handle the sudden increase in short sale, not enough revenues to create a huge force of negotiators/analysts to process the short sales, and the time it takes to train more personnel is also very lengthy. The result? Delays. That’s a reality we have to live with for a while. The banks are trying to catch up. They understand the losses.

Some raise the issue about news stories that the approval process would be streamlined with the government takeovers and that processing would take just a few days. However, along with the streamlining came increased levels of bureaucracy causing little or no shortening of the process.

There is another side of that coin. The bailouts by our Uncle Sam has inadvertantly caused an inticement for lenders to foreclose rather than mitigate. When you remove penalties for holding REO’s and give money to cover the losses, where is the incentive to approve short sales? This has been partially rectified by Uncle Sam backpeddling with the new law encouraging lenders to approve more short sales, but it is sort of like when companies took away nutrients when they made white bread and added back just a small fraction of nutrients and called it “fortified”.

Short sales still require patience.

Now about the inability to contact negotiators. Realtors make the mistake of thinking that the servicing lender negotiator or their management decide the short sales. Not true, usually. The loan is owned usually by a secondary market investor (SMI). The so-called negotiator negotiates very little and is merely a processing clerk, usually very low paid. You don’t need to talk to him or her until the case is processed and a response comes back from the SMI. The most important thing is that you do not give him or her a reason to tank your proposal. The proposal must be designed, not for the servicing lender, but for the SMI. When the response comes back, you will be notified. All you need to do is maintain communication, usually with the call centter for updates. Also, if there is mortgage insurance and the MI carrier has paid a claim, they too will need to provide approval. The negotiator merely provides their response to you. I would much rather talk to the loss mit call center people. Make them laugh. They will often go out of your way to talk during breaks to the negotiator and make things smoother for you. Do NOT call supervisors, unless the someone lies to you and it will be obvious. They rarely do anything to help you, will stick to only what is required of them, and can actually impede your case.

Finally, the third item, “a couple hours a day trying to push the lender for a decision”. Bad idea. Every contact you make to the loss mit call center or the negotiator gets logged into the contact database. If you call so often you will likely annoy or even anger them. Doing that could cause them to tank your proposal, and no one would know. There is no reason to call so often unless there is a promise of something by a specific date. Then call the next day after it is due. Otherwise, one call a week to the call center is enough. If they say it will take 15 days for a response, you justify that call by telling them merely that your client is calling and they demand you to check on progress. Keep it friendly. This approach is efficient, and stress-free. Everyone is happy.

The idea of pushing the lender for a decision is ridiculous. The servicing lender is not the one making the decision usually. Trying to push them is like trying to push a rope!

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