Courtesy of The Palm Beach Post, comes some fresh news for Florida, offering up to $20,000 to short sale vs. foreclosure.

The limited time offer has received little promotion from the Charlotte, N.C.-based bank, which sent emails to select Florida Realtors earlier this week outlining basic details of the plan.

Only homeowners whose short sales are submitted for approval to Bank of America before Nov. 30 will qualify. The homes must have no offers on them already and the closing must occur before Aug. 31, 2012.

This signals, in our opinion, the pressure they are feeling in Florida as the housing market continues to languish and the continued pressure to clear up these loans that are facing imminent foreclosure. Other interesting facts in the article include the fact that the current foreclosure timeline is almost 676 days – almost two years!

“I think this is a positive sign that the bank is being creative to try and help homeowners and get things moving,” said Paul Baltrun, who works with real estate and mortgages at the Law Office of Paul A. Krasker in West Palm Beach. “With real estate attorneys handling these cases, you’re talking two, three, four years before there’s going to be a resolution in a foreclosure.”

Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance, called the short sale payout a “bribe.”

“You can call it a relocation fee, but it’s basically a bribe to make sure the borrower leaves the house in good condition and in an orderly fashion,” Cecala said. “It makes good business sense considering you may have to put $20,000 into a foreclosed home to fix it up.”

Bank of America says that if the program shows promise in Florida, it could be expanded to other states. Other companies, including Wells Fargo and J.P. Morgan Chase also have similar programs.

More details:

Bank of America’s plan excludes Ginnie Mae, Federal Housing Administration and VA loans.

Similar to the federal Home Affordable Foreclosure Alternatives program, or HAFA, which offers $3,000 in relocation assistance, the Bank of America program may also waive a homeowner’s deficiency judgment at closing.

A deficiency judgment in a short sale is basically the difference between what the house sells for and what is still owed on the loan.

HAFA, which began in April 2010, has seen limited success with just 15,531 short sales completed nationwide through August.

In our opinion, this is just again a math decision a bank makes that falls in line with the bank’s decision. How does the bank minimize their lost? Short sale with a $20k kicker; or something else?

Post your thoughts in the comments!

Anyone who’s followed the Art of Short Sales for any period of time knows that we have not been a huge fan of the HAFA, HAMP, and other government programs designed to ease the short sale process.

This week’s CNN article by Diana Olick continues to prove that over a year after its inception, the program continues to draw poor numbers.

HAFA provides financial incentives for servicers and borrowers to do short sales (selling the property for less than the value of the mortgage) and deeds in lieu of foreclosure (basically just giving the property back to the bank). The program launched in April of 2010 and was later streamlined in December, 2010, based on feedback from mortgage servicers, real estate agents and homeowners.

So far, HAFA has completed 7,113 short sales or DIL’s. In April, however, HAFA saw 1,666 completed, up 74 percent from the 959 done in March.

The government is touting this is a huge success – “a 74% growth!” – but as Diana points out, a 74% growth of nothing is still pretty close to nothing.

According to the article, JP Morgan Chase alone does close to 5,000 short sales a month -and that’s just one bank. The expectation is that the top few banks are likely doing in excess of over 20,000 short sales a month – in that light, HAFA is still producing inconsequential results.

Similarily to what we’ve said here, HAFA’s targeted audience limits the exposure it could potentially have.

“HAFA is a taxpayer funded program, so it has eligibility requirements targeted at a certain segment of the population,” says Risotto, noting that the program is for owner occupants who can demonstrate financial hardship and whose first mortgage is less than $729,750. “HAFA is not meant to be for every person looking to do a short sale,” she adds.

That knocks out investors, jumbo loans and borrowers who don’t meet the “hardship” requirements of the Treasury. The big banks are likely more lenient on that last one, again knowing that a short sales will be cheaper in the end than a foreclosure.

What are your thoughts? Had any success with HAFA? Post in the comments and let us know about it!

Came across this article from CNBC last week discussing the impact HAFA has had (read: not what was expected!)

The treasure department says the following

“While HAFA has been widely credited with streamlining the short sale process by setting clear timelines, documentation requirements and procedures, feedback from various stakeholders including servicers, housing counselors, realtors and others supported that additional enhancements could be made to further streamline short sale transactions, to the benefit of homeowners.”

As a result, HAFA rule changes include the following:

A recent report from the folks who oversee the TARP (the Congressional Oversight Panel) said that the Treasury has spent just $4.3 million on HAFA for 661 short sales. So Treasury, last week, decided to change the rules a bit:

• HAFA no longer requires that servicers verify the borrowers finances
• HAFA no longer requires servicers to determine if the borrowers monthly payment is higher than a 31 percent debt-to-income ratio.
• HAFA no longer requires second-lien holders to agree to accept 6 percent of the unpaid principal balance owed them, up to $6,000. Servicers now decide who gets paid how much, with a cap still at $6000.
• HAFA now requires borrowers seeking a short sale get an answer/agreement within 30 days.

We have criticized HAFA since its inception and are not surprised at all to see it faltering. That said, the guidelines mentioned above look like they provide marginal improvements, but not enough to drastically change anything. In particular, one we wrote about in an earlier blog post:

Removing the case-by-case analysis that short sales need: Every short sale transaction is different, and lender should approach them as such. HAFA requires lenders to identify their minimum net proceeds ahead of time, and the guideline requires 120 day period to change that value. This means that if a property falls outside of the minimum net proceeds, it isn’t eligible under HAFA. That’s a shame; because the house is worth what the house is worth, and even in the span of 120 days the criteria used can change. It removes flexibility from the process, which is critical when handling these transactions.

This was not adjusted and really makes it difficult for lenders to truly handle transactions on a case by case basis.

What are your thoughts on the market forecast and the HAFA program?

Well, 2011 sure is off to a heck of a start, isn’t it? As we predicted here over and over again, the short sale marketplace is going to continue to be an important part of the still-stagnant housing recovery for the foreseeable future. So if you aren’t up to par on what you are doing, it’s time to get on board!

This recent article from Inman expands on what we have been saying, and predicts 5- 8 years of high short sale volume. What does this mean to you? You need to be competent in managing your short sales, and Short Sale Artisan helps you do exactly that! Even to 2020 and beyond!

The short-sale marketplace is not failing down anytime soon, and if genuine estate professionals wish to excavate into that niche, they should teach themselves thoroughly. That was a summary from dual short-sale specialists who spoke during Real Estate Connect Thursday.

“We’re looking during 5 to 8 years conservatively (of high short-sale volume),” pronounced Holly Maloney, a authorized short-sale dilettante and a Realtor during Huff Realty in Cincinnati, Ohio. “It’s a marketplace that’s going to be there. You possibly learn how to do it, teach yourself or work with someone who knows how to do it, differently you’re going to be giving business away.”

5 – 8 years is their conservative estimate!

Travis Waller, a authorized residential dilettante during RE/MAX Advantage Plus in Teaneck, N.J., expects disastrous equity to trigger a second call of foreclosures “that no one is even vocalization about.”

More than one in 5 homeowners with mortgages — scarcely 11 million borrowers — due some-more than their homes were value during a third quarter, according to a latest numbers from debt information aggregator CoreLogic.

“Until stagnation gets better, a market’s not going to get better,” Waller said.

Again making the case that volume and low home sales, and further depressing home values, as well as a jobless recovery, are contributing to home sales lagging some of the other gains that have been made throughout this economic “recovery”.

“It unequivocally comes down to display of your papers to a banks. The banks commend who has knowledge and who doesn’t,” he said. He generally represents sellers and carries between 15 and 25 listings in a month.

That is what we have been saying at Short Sale Artisan for well over a year. Formulating an ironclad short sale package is crucial to your package getting accepted. That isn’t going to change in the future, as you are always making the case to the bank that the short sale is the best way for the lender to mitigate their loss.

Both also offering agents this tip: Get a e-mail residence for a detriment slackening officer you’re traffic with. “It expedites a routine since during that indicate we can start e-mailing (him or her) PDFs,” instead of promulgation them faxes, Waller said.

This is a very key statement and underpins the importance of building relationships with loss mitigation representatives and banks you work with. If you are a high volume customer, they recognize you, and your offers are reasonable; you will dramatically improve the likelihood of speeding up your short sale offer and getting to approval.

Short sales will continue to play an important role for the foreseeable future – so you need to know them! What are you plans and predictions for the future of the short sale marketplace?

New home sales dropped to an annual pace of just 283,000, according to the Commerce Department. That was down 8.1% from a slow September and 28.5% from 12 months ago when the annualized sales rate was at 430,000.

Sales are off nearly 80% from the housing boom peak pace of 1.4 million, set in July 2005. Sales have remained near historic lows this year despite very attractive mortgage interest rates that slash the monthly costs of homeownership.

The Commerce Department also revised August sales figures downward to 275,000, which represents the record low point for new homes sales since it started tracking figures in 1963.

There’s a major factor depressing home sales of all kinds, according to David Crowe, chief economist for the National Association of Home Builders.

This likely has partially to do as well with the expiration of the homeowner tax credit. Many economists were predicting a rebound in the near future but this news puts the housing market in worse condition than anyone anticipate; which in turn means that loan modifications, short sales, and foreclosures will continue to play an enormous influence as people continue to remain underwater on their homes.

“So much bargain-priced, ‘used’ home inventory is available that the builders just can’t compete,” he said. “Over time, we’ll work through that mountain of existing home supply. But the key words are ‘over time.’ New home builders won’t have much to be thankful about any time soon.

The median price for existing homes sold in October was just $170,000, compared with $194,900 for new homes. That’s the lowest median price for new homes sold in seven years and down 13.9% from September.

The enormous inventory, coupled with continued downward price pressure (although we do believe the bottom is somewhere nearby!) means you need to make sure when making your short sale pitches to the banks you mention the status of the economy and the recovery that seems so distant in the future.

Crowe said that indicates many of the buyers were first timers. They’re less constrained than older potential buyers because they don’t have to worry about selling their existing homes in order to purchase new ones. One light at the tunnel, however, is a slightly shrinking inventory:

One encouraging aspect of the report for home builders is that inventory continued to wane. The number of new homes for sale at the end of October was about 202,000, less than nine months’ supply at the current rate of sales. The number of homes on the market has dropped about 20% since October 2009.

As we have been saying for some time, we think there is at least 3 – 4 more years of strong short sale potential in the marketplace. Conflicting information about economic recovery makes us believe that the optimism about rebounding home prices is, well, a little too optimistic.

What are your thoughts? Post ‘em in the comments!

Top mortgage servicers have completed 91,827 short sales or deeds-in-lieu of foreclosure on canceled trial or declined modifications through the Home Affordable Modification Program as of September, up 27% from the previous month, according to data from the Treasury Department.

This is pretty fascinating news. The HAMP program continues to fail such that there has been a 27% increase in the number of attempted modifications that proceed on to deed in lieu or short sale. Although, we have been saying for close to a year that HAMP and HAFA have been incredibly poorly executed.

The Treasury started HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Through October, those servicers have started 1.4 million three-month trials and converted 519,648 of them into permanent status, though conversions have been going down in recent months.

The top eight servicers — have canceled 551,821 trials either due to a redefault, lack of documentation, or the borrower was deemed ineligible. Those same servicers have declined 842,436 homeowners from entering a trial, according to the latest Treasury data through September.

Of the canceled trials in that time, 47,001 have been liquidated through a short sale or the homeowner gave up the deed-in-lieu of foreclosure. Of the mortgages that were denied from a trial, 44,826 went into short sale or deed-in-lieu for a total of 91,827.

Most of the short sales, however, are reportedly not being done through the Home Affordable Foreclosure Alternatives program, which was launched by the Treasury in April to incentivize servicers to conduct short sales and DILs on loans that fell out of HAMP.

All that hullaballoo about HAFA saving the day and the majority of them aren’t even being processed through HAFA (which was intended to be a relief program for those who couldn’t maintain payments even on a modified loan).

Even though the Treasury pays the servicers for a transaction done through HAFA, the Special Inspector General for the Troubled Asset Relief Program reported 342 short sales and DILs completed through HAFA as of Sept. 30.

The Treasury has not released official numbers on HAFA, but has said it expects to before the end of the year.

We can hardly wait to see what those numbers look like! 342 short sales through HAFA as of Sept 30th!!

An article published on 10/19 by the Herald in southwest Florida discusses the growth of short sales as a result of the recent moratorium on foreclosures by several lenders, citing:

Short sales are in vogue in Southwest Florida, a direct result of the broad halt on foreclosures imposed by some of the nation’s largest lenders.

There is some indication that the logjam might be clearing, with Bank of America announcing Monday that it plans to resume seizing more than 100,000 homes in 23 states next week.

But the halt by the big Charlotte, N.C.-based lender, Ally Financial Inc. and JPMorgan Chase already has been felt in Manatee, Sarasota and Charlotte counties, a region where distressed property now accounts for about 50 percent of sales.

Realtors have lost sales, and some homeowners who had closed on a bank-owned property have been left in limbo.

But one positive is that lenders have ramped up short sales — where a bank accepts a sale for less than what is owed on a property — to get them off their books and to avoid additional foreclosures being snared in a mess that is rooted in questions of flawed documents.

It’s in this foreclosure stall that the lenders attempt to get rid of properties before they make it that far in the process – i.e. before foreclosure. This is positive news for the banks, although we still find it unbelievable that the banks did such a poor job auditing their foreclosure process that they literally had to stop processing them while they lined their ducks up in a row.

“It’s a total 180 by the banks,” said Matt Augustyniak of Bradenton’s Horizon Realty, which also offers title and mortgage services. “Banks feel they have no other options and they have to get this stuff off their books ASAP.”

The question for short sale professionals is; does this adjust the bank’s motivations for a short sale? We think it does provide  abit more incentive to clear them up sooner – but on the flip side; also means there will be more attention paid to the value proposition a short sale offer presents. This means it is more critical than ever to provide an ironclad short sale package and bulletproof documentation – don’t give the bank any reason to dismiss your offer!

A short sale initiated two weeks ago was completed from offer to closing in six days, he said. Just prior to the foreclosure halt, Horizon had been wrapping up short sales that had started in the spring.

That probably belongs in the Guiness Book of Records!A prediction by a realtor in Florida related to her market:

It will take at least six months for the cloud over foreclosures to fully lift and that short sales will be all the rage during that time.

For those specializing in foreclosures, the freeze has meant lost business.

Drew Peterson, a sales agent with Sarasota’s Re/Max Alliance Group, already has lost one sale and half his business is on hold.

“I could complain, but I think it’s a good thing because it will put in tighter controls,” Peterson said. “The banks’ main concern is selling these properties and getting them off their books, and I’ve been hearing from my bank contacts that they are shifting resources to short sales while the moratorium is on.”

A bigger concern is the ripple effect of the moratorium. Our bets are that the situation in Florida is replicated across the nation, especially in those heavy hit areas like California and Nevada.

But others worry that even if the foreclosure process starts grinding away again, the delays caused by banks’ review could have a profound impact in Florida, a state whose economy is so reliant on real estate.

“It will have a ripple effect into all of the businesses that rely on real estate and may increase the unemployment rate, which may in turn increase the number of foreclosures,” said Daren Blomquist, a spokesman for California-based RealtyTrac Inc., which tracks the foreclosure phenomenon. “This adds a whole new cloud of uncertainty to the housing market.”

It sure is an interesting time in the market. What are your thoughts on the article? Do you think short sales will experience a bounce because of this foreclosure stall and “blip”; or will REO and non REO delinquent properties maintain similar proportions for the foreseeable future?

A new article in CNN this afternoon discusses Bank of America abrubtly halting foreclosure sales (but still continuing the foreclosure process for delinquent borrowers. It seems that the banks are discovering their loss mitigation departments are not following protocol when making foreclosure decisions.

Just last week, Bank of America indicated it was halting foreclosures in 23 states where those foreclosures must be approved by the courts.

Reading the article, we aren’t certain what the motivation truly was for the halt. The quote from CEO Brian Moynihan seems to contradict the headline of the CNN article that there are flaws in the process:

“We haven’t found any problems in the foreclosure process,” Bank of America President and CEO Brian Moynihan said in an appearance before the National Press Club in Washington. “What we are trying to do is clear the air, and say ‘We will go back and check our work one more time.’ ”

The review process is likely to last a few weeks, Moynihan said.

JP Morgan also stopped foreclosure proceedings for nearly 56,000 homeowners after learning that loss mitigation department members were actually approving foreclosures without even reviewing the loan files and foreclosure applications.

It seems quite ironic that the banks, who have previously complained about fraud in the foreclosure place, would likely have been able to prevent much fraud by simply doing due diligence on their foreclosure files. This is quite an insight into the foreclosure departments at major lenders. Apparently they are much more incompetent than the orderly processes would appear.

State attorneys general have stepped up pressure on banks in recent days after it was revealed that some bank employees had signed foreclosure affidavits without verifying that the documents were accurate, a process now known as “robo-signing.”

What does this ultimately mean? More, or less foreclosures? We think less, and with the way sociology works, you can expect a swing back in the other direction to very strict regulation and oversight by the lenders, making things more difficult to push through the loss mit departments, be it a short sale or a foreclosure.

Ohio’s attorney general has filed a lawsuit against Ally Financial and its subsidiary GMAC Mortgage for allegedly submitting fraudulent documents in hundreds of foreclosure cases across the state.

Sen. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee, announced Friday that he will hold a hearing to investigate allegations of improper mortgage servicing and foreclosure processing on Nov. 16, the day after the Senate returns from recess.

On Thursday, the White House said that President Obama won’t sign a bill that could have made it easier for courts to clear foreclosures. The bill would have required federal and state courts to recognize documents that were notarized in other states.

We think this is some of the likely fallout from these events:

1. Less foreclosures being processed as files are more diligently checked
2. An increase in the importance of a complete and factually ironclad short sale application
3. Increased discussion in the arena on fraud - hopefully not extending into real estate investment
4. Possibly an increase in or new government regulation

Quite an interesting set of events. What do you think this means for the short sale marketplace?

Popping up on Twitter and elsewhere today was this new article from Bank of America claiming they have improved their short sales process.

There is no date on this article so it’s hard to say when it was originally published, but here are some key pieces of information:

High unemployment levels, declining home values and other factors facing some families have doubled short sales in the last year. The result: the slowing of an already time-consuming and intensive process in which participation from multiple parties is typically required.

… because of the increased volume, presumably, that hit Bank of America and the under staffing that (had?) existed there.

We clearly recognize the need to improve the short sale process for both our customers and the real estate professionals who are critical to a successful transaction. In response to the rise in short sale volume, we have updated training, enhanced our technology and established a dedicated team of short sale professionals that is available to help customers and real estate professionals navigate the process.

Sounds good. We knew this already, but it’s good to hear it from the horse’s mouth, so to speak!

We are also piloting a cooperative short sale program that includes proactive outreach to customers who have been unable qualify for a home retention solution, or have fallen out of a workout program, to measure their interest in a short sale. The property will be listed at market value, and Bank of America will work with the customer and agent throughout the marketing period. If an offer is received, we will be in a position to approve the sale within two weeks. This program is currently in a limited pilot stage, and we hope to expand it soon.

This is interesting. It’s almost an attempt to list the price at market value (which is almost always perceived as too high) and then have a quick turnaround situation. There is little information here on what qualifies an individual for this program; other than those who have fallen out of a workout program. We assume the rigors of getting into a workout program are thus the prerequisite for this pilot program.

Bank of America has taken big steps to shorten response times and improve overall communication. We recently deployed a secure, password-protected internet portal called Equator (formerly known as REOTrans). Bank of America is the first to provide this around-the-clock platform for real estate professionals and homeowners to track the status of short sales. In real-time, homeowners, agents and bank representatives can see and exchange documents, track important dates and deadlines and significantly improve communication between all parties involved.

Mixed bag on equator. We have attempted to communicate with Equator to see how we could integrate Short Sale Artisan with equator and unfortunately we got a big fat “not something we are looking at”. Hopefully in the future Equator will link in better and open up their platform to allow direct data submission from short sale software providers, but it’s not in the cards as of today. Short Sale Artisan provides a much less stringent way of interacting with all users than Equator, and as far as we know Equator does not have a homeowner-facing side.

(If you haven’t seen it, here is the Bank of America Equator Short Sale Guide)

Finally, the article has a few tips Bank of America suggests:

There are many things you can do to help minimize this lengthy process time:

• Advise clients to contact their servicer as early as possible
• Ensure all customer financials are in PDF format
• Help clients complete all documentation accurately and as soon as possible
• Make sure the purchase offer is a legitimate offer and fully executed
• Submit the best possible purchase offer at fair market value
• Provide listing information and comparables to support price

Frequent causes of delay to be aware of:

• A change of buyer or agent at any time may require process to revert to an earlier step; notify client’s servicer immediately if there is any change
• Investor/mortgage insurance approval is needed if the servicer is not fully delegated to approve the short sale
• Release on a second lien must be received prior to issuing an approval letter
• If customer has filed bankruptcy, the trustee must provide a court document that approves the sale of the property

These are all relatively benign suggestions. Short Sale Artisan helps with most of these – especially the PDF documentation suggestions and creating a reasonable offer at a fair value with detailed analysis on why. Remember to keep in mind the bank’s motivations during a short sale transaction!

We aren’t 100% sure what all this means. It doesn’t sound like much is new at Big Red other than some new pilot program to bring up short sales to homeowners who have defaulted while participating in hardship programs, but any focus on short sales is typically a good sign that we are moving in the right direction.

If you are a pilot member or have other comments on the Bank of America Short Sale Process, post it in the comments!

A new article from the LA Times appeared on September 5th coining a new type of scam called, “Flopping”.

In a nutshell, the article claims that agents, lawyers, and loan brokers all conspire together to devalue a house more than it really is to get a better deal on a property than it is truly worth, and it coins this, “Flopping”:

In an illegal flip, the scam artists inflate the value of the property so the mortgage company will lend more than it’s worth. Then they work a deal with the seller to pocket the difference.

A flop works the other way. Rather than inflate the value of the house, they deflate it so the lender will permit the borrower to sell the place for far less than what it’s worth. Then the buyer or realty broker, who is often part of the fraud, sells it to someone else at its true value and splits the profit with others in on the deal.

First off, we have a big concern that the LA Times makes a statement like this with little backup other than a single quote about homeowner scams from the recently released CoreLogic study.Furthermore, the CoreLogic study commentary around fraud typically deals with transactions that are not arms length and / or transactions where full disclosure is not occurring (identifying future sales or B-C flip type of transactions).

We are surprised at the traction this article has gathered on Twitter and elsewhere; because frankly it just seems so cobbled together and leaving loose ends out there. The advice at the end of the article is almost incoherent:

• Be alert to who is counseling you. Don’t respond to unsolicited e-mails, and don’t call the numbers on roadside signs. Trust only your closest advisors. Or contact a counseling agency approved by the Department of Housing and Urban Development. If a counselor is not HUD-sanctioned, look elsewhere.

• Just because you see the letters LLC after the name of a firm or individual doesn’t make it or him legit. Check them out with the state authorities to make sure that they are registered or licensed, and with your state consumer-affairs agency to see if any complaints have been lodged against them. Ditto for your real estate agent.

• Beware of claims such as “We win 99% of our cases” or “We don’t take no for an answer.” It just doesn’t happen.

• If someone suggests that the lender will agree to an offer that is far below what your house is really worth, even in the current poor market, you should be wary. The agent, in conjunction with someone else in the transaction, may have a buyer waiting in the wings at a higher price.

First off, who is this directed towards? Homeowners? If so, then why does the opening statement say that Homeowners tend to lose millions on short sale fraud, when the homeowners financial position isn’t impacted once you are in the short sale territory?

Or, is this directed towards those working with lawyers and title brokers?

The final point they make is based on the house being worth far below what it truly is – who determines that? There is only one person that determines home values – and that is a BUYER. The bank does their due diligence with an appraisal or BPO before a short sale offer is approved. A ridiculous offer should be vetted during that procedure, but again – it’s important to remember that all these numbers are only someones opinion.

As we always say – as an investor or agent, you need to disclose what the circumstances around a transaction are and be honest about the deal. If there is a mass conspiracy between BPO agents, title companies, and brokers, I would sure be surprised. It does happen, but those are clearly unethical transactions. The bank needs to cover themselves and make sure they are performing accurate valuations to mitigate their risk, and that’s the end of it.

Thoughts? Have you encountered any of these so-called “Floppers” in your neck of the woods?