Pam Marron Home Lending

Bright Spots and Challenges Ahead for Short Sellers

Homeowners Try to Get Short Sale Approved While Being Current but Lenders Make it Impossible to Proceed!

Short Sale Bright Spots

There are some bright spots.

Lenders like Wells Fargo and Chase are doing the right thing with portfolio loans, allowing underwater homeowners to proceed with a short sale without being delinquent.

Institutional investors are coming into areas and purchasing homes at nearly market price when the rent meets sustainability numbers. These same investors have deep pockets and rehab homes back to safe, livable standards and get the eyesores next door back in good shape. Some of these investors even allow for a rent-back, allowing short sellers time to repair credit and prepare for the next place they will live in.

And the Federal Housing Finance Agency provided a new short sale policy that allowed short sellers to get approved while being current on their mortgage payment, with hardships listed on the Aug. 2012 Form 710.

Challenges Abound

But that is it. Lenders are either unaware or are ignoring the other 6 hardships. Underwater homeowners that are trying to short sell while being current are STILL being turned down for the following reasons, even after the Nov. 1, 2012 FHFA policy that states they can be current:

  • The “investor” states they must be 30 days late to complete the short sale.
  • The lender disqualifies the hardship even though it is listed on the 8/2012 Form 710.
  • The lender tells them there are too many people they have to help that are already late. Why should they help someone current on their mortgage?

And, unlike a refinance that has equity, widows, widowers and ex-spouses in a divorce that were deeded or willed a home cannot get a HARP refinance or other refinancing for underwater homes unless they were already on the mortgage.

There is no credit code for a short sale, so when short sellers are in the clear to repurchase a home, their short sale credit is reported as a “Foreclosure” through Fannie Mae and Freddie Mac automated underwriting systems. This can be corrected, but is costly, time consuming, and often results in further delay to get back into a home purchase.

Non-Fannie Mae and Freddie Mac mortgage holders have limited mortgage product available to refinance, unlike the HARP 2.0 available for Fannie Mae and Freddie Mac mortgages. Conventional  portfolio mortgages have NO options.

And, a good number of realtors blame underwater homeowners, holding them responsible for careless financing and low sales prices that keep values down in real estate markets. Though realtors desire listings of underwater homes, many are reluctant to help those that they perceive made the housing crisis what it is.

March 13, 2013 by · Leave a Comment

About Pam

Since 1985 as a loan originator, highly experienced with automated loan approvals on DU, LP, and with USDA GUS systems, thorough knowledge and use of FHA loans including 203K rehab, conventional loans including USDA, Homepath and rehab, and VA loans. After 27 years, I STILL love this business!

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