LawsonGroupMediation

Many people agents and investors who submit short sale proposals to lenders assume that the negotiator assigned by that lender is the person that will approve their short sale. Others believe that the negotiator is just the front man or woman for a committee or committees who provide the actual approval or rejection.

Actually neither is true, except in rather uncommon situations. That lender is merely a servicing lender. You see, shortly after loaning the homeowner the money for the home purchase, they sold the loan note to a secondary market investor (SMI), such as Fannie Mae or Freddie Mac. The SMI is now the owner of the loan and are the entities that approve or reject the short sale applications. Now, this is true except when it is not. There are some situations in which the servicing lender has that authority, but this is not as common. Fannie & Freddie own about 65% of the mortgage loans, or more.

Also, if the loan is in default and there was private mortgage insurance, this MI carrier also has the right to approve or reject the short sale. In fact, if the MI carrier paid off the loan entirely, they are now the owner and they solely have the right to approve or reject the short sale.

The negotiator for the servicing lender really negotiates little, if anything. He or she is merely an analyst who makes certain that everything in the proposal is technically correct and then forwards the proposal to the investor or MI carrier, or both.

Many agents and investors make the mistake of trying to argue or reason with the negotiator. Those negotiators feed this misconception and will lead you to believe they are the ones who must approve the short sale. Yes, they often lie. They like to lead agents and investors into believing they have the power. However, this is rarely the case.

There is an exception to this. There are some regional banks who provide home loans from monies local or regional investment groups made up of wealthy doctors, lawyers, executives, etc. These groups will often by contract vest almost complete authority in the bank to negotiate and approve the short sale. The contract between the investment group and the bank will spell out the specific requirements to which the bank must adhere in the approval or rejection.

It is now the case, that since Fannie and Freddie own most of the loans, and the government now owns those entities, that it is the federal government who will approve or reject your short sale. The result has been the slowing down to a snails pace the approval or rejection of the short sales, and a change in which the short sale will be analyzed. They have been approving less short sales and have, in fact, have encouraged the SMI’s to foreclose on more homes with the bailouts.

This is now changing. Like every government screw-up, they are now trying to fix the problems they created. However, they are no longer using the short sale vs. REO analysis, but are now using the minimum net receipt to lender threshold of the fair market value analysis whether to approve the short sale. I will speak to this in another article soon.

For the most complete and thorough guide and instruction in submitting short sale proposals, see our book, Short Sales & Loan Modifications: A Practical Guide For Real Estate Agents and Investors. This simple to read book is sold on Amazon.com and available through our website.

TheLawsonGroup prices provide mediation services for short sales and loan modifications for those agents and investors who wish to list the properties (or buy them), and leave it to us to draft and submit the proposal and work with the lenders to get them approved.