Short Sale Report

1sts - Short Sale file handling runs about the industry average of 60 days +/-.  Normally not flexible when homeowner hardship is unique.  Operates very much like the big bank they are - cumbersome policies that are slow to change.
2nds - BofA continues to present the most difficult challenges in the servicing industry on Short Sale proposals on home equity 2nds.  Our experience is that it takes a cash contribution from the homeowner of 80 cents on the dollar, or 10 cents+/- on the dollar cash and a note for the balance of the deficiency to get BofA to approve a Short Sale on a HELOC.  BofA does not seem to respond favorably to documentation demonstrating the borrowers inability to meet the contribution demands.
Update: Hooked on recourse.  BofA is very frequently inserting "reservation of right" language in their approval letters. That means they are reserving the right to pursue the borrower for any deficiency balance after the short sale closes.  We are seeing it on firsts as well as seconds, and we are seeing it on purchase money debt as well. Bo A is actually telling distressed purchase money borrowers that they will be punished for staying the course and working to get a short sale done -- because if the homeowner were to just walk away, BofA would not have the right to so much as wave at them on the freeway. Who is coming up with this stuff? At a time when we are hearing how we should pull together, the largest bank in the United States wants to be sure to kick borrowers while they are down.

1sts - Chase has been pretty good to work with, but sure do move at a slow pace much of the time. Let's hope that Chase decides to start moving faster, otherwise, with the acquisition of WaMu, we could see the slowest moving financial institution on the planet.
2nds - We are having some unpleasant experiences with Chase on 2nds. The sad truth is that many distressed homeowners have borrowed beyond their ability to repay in an effort to remain current on their home.  They have dug a horribly deep hole for themselves -- they have few, if any assets, and a pile of debt.  And Chase is demanding cash, and I mean lots of it. Many times as much as 50 to 60% of the outstanding balance.  Chase, where would you propose these folks go to get the money?

1sts - Citi is pretty reasonable on 1sts, once you figure out who to talk to. If you get a good contact at Citi, save the number. We have success at times when we direct a file to a negotiator we have had success with previously.
2nds - Citi has been moving files into the "Recovery" department pretty aggressively - no one has shared their policy with us, but it seems that at about 90 to 120 days late the 2nds go to a department that is darn tough to please. Once in the Recovery department, it will take a bigger contribution from the homeowner most times, even on non-recourse debt. Even with a 10 cents on the dollar contribution, it sometimes takes an agreement to a soft note to get an approval. Bottomline, move fast on Citi 2nds if you can.

Note: Bank of America has acquired Countrywide, but their behavior on Short Sale files continues to be unique and dissimilar.  1sts - Too many files.  From the beginning you could feel CW working to improve service levels, the problem was simply too large from the get go.  Policy changes at improving processing efficiency have left us feeling like the target is constantly moving.  The "triage" program, designed to cull out offers not worthy of consideration has ended up disqualifying many good offers.  CW does deserve credit for their efforts, including their willingness to be fair with junior lien holders early in the Short Sale cycle.

Update: The infamous paragraph number 10.  Someone thought it would be a good idea (I'm betting someone who crossed the isle early from BofA) to include a clause in their approval letter that forces every heads up title/escrow person to say... STOP!  There are to be no transfers of the property within 30 days of the closing of this transaction.  Escrow instructions must contain a clause that if such a transaction takes place then the title/escrow company must notify (Countrywide). The clause makes the title/escrow provider responsible for tracking the property, and potentially liable for problems that could come about if there is a subsequent transfer. They will take it out if you fight - like anybody needed another reason to fight on a short sale transaction.

Note: On December 22nd Downey Savings was acquired by US Bancorp. US Bank is an super regional bank with very little exposure to the mortgage default problem. It remains top be seen how they will put their stamp on Downey asset management operations. Will keep you informed as the situation develops
Except on a very small portion of their servicing portfolio, Downey will no longer work on short sales.  If it is Downney paper they appear to be willing to do a short sale and are actually very responsive.  DO NOT assume that a Downey Savings mortgage is a no go - Call Downey, or have your client call Downey, and ask if they will work on a short sale on the loan before you surrender on a good short sale opportunity.
Update: Watch them operate and it's no wonder they are where they are. I just would have expected U.S. Bank to bring their strong operational expertise to the table by now.  Had a short sale ready to close last week in Southern California that would have generated $600,000 in net proceeds. Downey just said no. No particular reason, just no. This stuff is too crazy to make up. So, Downey really showed that seller. Downey sold it to a third party bidder at the steps three days later for $445,000. Do the math on that one.

In nearly all cases you will run into Franklin Credit as a junior lien holder. We find them to be very difficult to work with. Their focus is entirely on collection, in many cases without consideration for either the circumstances of the borrower, or the borrower's rights. We have had particular difficulty in working with Franklin Credit on transactions in which the borrower has had the debt discharged through bankruptcy. They seem to have a 'we make our own rules' attitude.

First Horizon usually has a negotiator assigned within 15 days and a preliminary response within 45 days. We have, however, had a few experiences with First Horizon that have involved more time and effort to get action on a file. Sometimes, and this happens with a few lenders, it just seems that occasional files get turned over to negotiators who sit in rooms with no windows, and have no interest in pushing files forward.

As of December 1st, all Greenpoint servicing will be transfered to Countrywide. Many Short Sale files have already been moved. You will be using the same loan number, and Countrywide will pick files up mid-stream. It is best, however, if you prepare your Short Sale clients for a small delay during the transition period

If you want to get through to a Greenpoint negotiator, call before 7:00am pacific time - and call Monday through Wednesday. Otherwise, prepare yourself for frustration. Simply don't have the manpower to handle their file load. Hold times are very long, sometimes over an hour. And, don't expect a return call....ever.

1sts - You can usually get someone to talk to. Experiences seem to be uneven - some o.k., many not so o.k. Not fast movers, budget over two months for an approval.
2nds - For some reason HSBC uses Century Credit to collect documents on junior liens - then Century Credit starts calling for file updates. Go figure. Watch out for the HSBC recovery department after a "charge off." Not very nice overall on 2nds. Frequently takes the position that if the homeowner doesn't give a pound of flesh they are going to punish them with a foreclosure.

One of the most active servicers in the area of proactive loss mitigation. Unfortunately, it has not translated to better, or significantly faster work on short sale files. Given the attitude of Litton management towards foreclosure avoidance programs, Litton is a servicer to watch going forward. The bet here is that before this cycle is over Litton will be one of the easier servicers to work with.

Litton update. An example of Litton's attitude. Litton has said they were willing, as a senior lien holder, to allow as much as 10 cents on the dollar to junior lien holders. That was until they discovered most of the major servicers were more than willing to accept the 10 cents, but were not the least bit interested in reciprocating. The process seems to punish progressive thought at every turn.  Nonetheless, hat's off to Litton for trying.

1sts - We don't run into a lot of National City 1sts. Those we have handled have gone well. I think that is because National City saves all their unpleasantness for those who ask for help on a 2nd.
2nds - Just plain not nice most of the time. National City speaks of the cross training of their staff (collection and loss mitigation), well I can tell you which side it feels like most come from. Working with National City is frequently a reminder why it's nearly never a good idea to speak with anyone's collection department. You will want to prepare yourself for a real battle to get a fair result for your client. Always be polite and respectful, but with National City you will need to be tough as well. In the end National City demands 10% cash recovery on 2nds, regardless of your circumstances. No ideas on where to go get the money, they just want it. For example, on a purchase money 2nd with a pre-bankruptcy balance of $67,700. The 1st, Countrywide, approves the Short Sale and we are able to get $3,000 on the table for NC - for a debt that has been fully discharged through bankruptcy. NC says no, we need a 10% ($6,770) recovery offer, or they won't even look at the file.

1sts - Erratic. Policies shift quickly. For a time in 2008, Ocwen would not work on Short Sales on 1sts. After a couple months, they were back in. Now, however, Ocwen will not postpone sale dates to accomodate a Short Sale - even if it just about ready to close.
2nds - Ocwen has been one of the easiest to work with on junior liens from the beginning. They can, however, be demanding in terms of making agents work hard to get closing date extensions.

Although not really a "lender" mortgage insurance (MI) companies like Old Republic may have a stake in the Short Sale at least on covered loans. We are talking, in most cases, about MI coverage that was purchased, or paid for, by the beneficiary (lender) - we are not talking about traditional borrower paid mortgage insurance. Old Republic generally demands 20% of the oustanding lien (usually it's the junior lien) from the borrower. On occasion, we have been able to satisfy Old Republic with an unsecured note. It gets difficult when the demand for recovery is on a purchase money obligation. Because, the borrower would likely have no obligation for the debt after the foreclosure, at least in CA.

Option one is a good example of a lender that has grown into the Short Sale process. In the early going, Option One was simply miserable to work with. Even now you will be dealing with a call center that seems to be based outside of the country, so the contacts can be challenging and not very productive. Once you get to a negotiator you will find a better experience.

Unreasonable is the only way to describe most demands made by mortgage insurance companies when their cooperation is being requested to get a Short Sale closed. We continue to have more than occasional success when we attack the challenge head-on. It is time consuming. Particularly in those cases where the debt in non-recourse, you can be successful when battling with MI companies, including Radian. Just make sure you start early and have a big cup of coffee.

Saxon is a real bugger on the commission issue. Spend a ton of time fighting and they allow 5% sometimes, but it is a long fight. You can usually get through to your Saxon negotiator, and when you don't it actually pays to leave a message - they frequently return calls.

Saxon update. Saxon seems intent on alienating as many real estate professional as they can.  Not only do they fight till the cows come home to keep commissions on Short Sales to 4%, total.  Now, their approval letters routinely include (in BOLD type so you can't miss it) the clause — ) Any EXTENSIONS WILL result in a 1% commission cut?.

Specialized has been one of our favorites, making common sense decisions that maximize capital recovery --- until some new people and a new attitude. We are seeing foolish responses on purchase money 2nds where they face a total loss if the 1st forecloses, even with reasonable offers from senior lien holders. They claim that their recovery department can squeeze money out of somewhere after they are wiped out. Dare I ask where? The tooth fairy? Unnecessary foreclosures hurt everyone. Come on Specialized, you are better than that.

They move quickly in most cases. I believe part of reason for Wachovia's speed is their recognition of challenges in the real estate market. Everyone " talks " about it - the view from here is that Wachovia really gets it. Wachovia has used the localized approach for much of their REO portfolio, and we believe that has helped them better understand how tough things are at the street level. Speaking of tough, that is the best way to describe Wachovia on value issues. Don't send Wachovia a deal based on a wholesale price and expect a favorable outcome - and that is as it should be. Most times, when Wachovia responds to a file, the focus is on the 'net proceeds' number. So, look your deal over closely before you conclude that you have, or don't have, a deal.

Update - For the second time in the last few months it has been brought to us that WaMu has sold 2nd mortgage notes after a Short Sale has closed. In both cases (we fear there have been many others) the approval letters included provisions that said the seller was to contribute ZERO at closing, and no mention is made of WaMu reserving the right to pursue collection after close.  We have reached out to WaMu management and suggested that what occurred was an "administrative error."  They have been given a graceful way out - instead, WaMu has gone silent.  In the meantime, collectors are going after the Short Sale sellers, non-stop. We will continue to appeal to WaMu management, and will keep you informed.

From the very beginning of this cycle, going back to 2006, Washington Mutual has presented unique challenges for those trying to get Short Sales approved.  We have encountered some very good people there along the way, but they seem to be handcuffed by challenges caused by understaffing and transaction-unfriendly policies. The acqusition by JPMorgan Chase may eventually improve WaMu's performance, but that assumes that a serious culture conflict is avoided. For now, it frequently takes WaMu five to six weeks just to assign a negotiator to a file. A bit of good news, you will start to make progress quickly once you have a negotiator. We are bumping into many WaMu files where we are being told the total commission will be capped at 3%. In almost every case, it was not truely a policy, but an overly aggressive negotiator. What a waste of everyone's time - and every day wasted means a bigger loss for the beneficiary.

1sts - Slower than they should be.  Beware of the common call center approach to Short Sale file processing.  Messages are regularly inaccurately posted to the record, leaving you grasping for the proverbial straw when following up on file on which your last conversation was badly noted.  Tip - recount your conversation and reconfirm they have a complete file before concluding your conversation with loss mitigation.  Reasonable on commissions until....
 2nds - Watch your commission and take nothing for granted when working on a Short Sale with Wells Fargo Home Equity.  We have had experiences of late where Wells Home Equity has gone directly to agents demanding a portion of the their commission as a condition of approval.  While Wells is not as tough as BofA on contribution demands on HELOC Short Sales, they have ratcheted up their demands from homeowners of late.

Seems to be firmly in the "this whole mess is the borrower's fault" camp. Frequently unwilling to give a borrower "full settlement" language, even on non-recourse debt. Pretty good about extending approval and postponing sale dates.