Successful Short Sales in Marin County
The Bank Perspective
(The Third of Four Installments)

Until recently most of the foreclosures and short sales in northern Marin and Sonoma County were driven by the sub-prime loans. Now, with the payment increases coming due for those homeowners with 5-year interest only ARMs, short sales are increasing in higher price points and pricier areas.

The impact of the interest only ‘bad loans’ is already showing in San Rafael, Mill Valley and the tony towns of Ross and Tiburon. And in Marin the escrow closing of short sales of single family homes has increased dramatically. It is no small wonder that George DeSalvo, a go-to real estate agent of foreclosure sales, has reportedly said he’s planning on moving in on short sales.

The Pipeline is Clogged
Many banks have been hopelessly understaffed (short sale specialist Lauren Starks told of one loan negotiator who has a case load of 1300 properties) and they’ve hired temps to fill their customer service/debt collector departments. This has led to miscommunications and complications in the process, thus the short sale has made the normal home sale look like a walk in the woods.

For the agent assisting the seller in a short sale the solution to the clogged pipeline is a combination of experience in dealing with the banks, extreme attention to detail in the initial package and perseverance. Success in short sales is possible … and becoming more frequent.

Programs
First, the government rolled out the Home Affordable Refinance Plan (HARP), then the Home Affordable Modification Plan (HAMP). Less than 400,000 homeowners out of an estimated 4 to 5 million homeowners seeking help have been helped by these unsuccessful programs.

Banks were in a difficult situation because of a rule change (they could no longer ‘mark to market’ their loans) which means that if they approve a short sale that nets them $400,000 on a property with a $500,000 loan their assets are reduced by $100,000 and their ability to lend to other clients is also reduced. Remember Tamalpais Bank?

Starting in April with the new Home Affordable Foreclosure Alternative (HAFA) the effort will be to short sale the homes where the homeowner is struggling because, says Juliet Pesce of Wells Fargo Mortgage, “On the average a short sale saves the bank $38,000 when compared to a foreclosure.”

The Process
A short sale is a complex beast. It requires an offer from a buyer who is willing to wait for a month to a year or more; acceptance by the homeowner who is in pain and losing their home; and this is followed by approval from an overworked, unappreciated staff at a bank that is losing money on the sale. The advantage Pesce has is that most of the loans she deals with are warehoused loans, loans still held by the loan originator (Wells, Wachovia et al).

The complexity increases astronomically when the loans have been purchased by multiple investors and/or when there are several loans on the same property.

The homeowner who purchased with WaMu, B of A and a host of other lenders have a difficult process ahead because their lenders have sold to investors and the loans are controlled by Pooling Service Agreements(PSAs). Within each of these ‘PSA pools’ are multiple fish (investors) … including entities such as Iceland and pension funds. Each PSA has a different set of criteria on dealing with short sales and a strong confidentiality agreement which makes each transaction unique. The lender’s approval comes from the investors. Thus it takes a long time to get approval of the sale.

The best luck in short sales is with lenders who have portfolio loans (for example Wells and Wachovia) and where there is only one loan on the property.

If you or a friend or family member are facing foreclosure, working with a lender on a modification or considering doing a short sale email or call me. You can contact me at tverkozen@fhallen.com or call me at (415) 257-2039 and we can discuss the possibilities.

Successful Short Sales in Marin County
Part 1 – Overview
Part II – Short Sales from the Homeowner’s perspective
Part III – Short Sales from the Bank’s perspective
Part IV – Short Sales from the Buyer’s perspective

Posted by:  Tom Verkozen