Our business has been very involved in negotiating short sales over the last three years or so. These past few months we have noticed some specific trends with regard to short sale negotiations. Today I wanted to write about one of those trends: the postponement of the Trustee’s Sale (or foreclosure sale).
When I began negotiating short sales during this economic downturn a few years back, it was fairly commonplace to request that the bank postpone a Trustee’s Sale or foreclosure sale in order to entertain or continue to process a short sale transaction.
Nowadays it is becoming increasingly more difficult to get the mortgage lender to agree to postpone the foreclosure sale. I can only surmise that banks have become more aware of the fact that some individuals may use creative strategies and tactics in order to postpone those foreclosure date. As such, those same mortgage lenders need to become more rigid in their practices with regard to those Trustee’s Sales.
In January of this year, I wrote a blog post about Fannie Mae’s new short sale policy in which any short sale on a Fannie Mae loan must close on or before the foreclosure sale date. Fannie Mae was not and is not planning to postpone a foreclosure sale in order to entertain a short sale transaction–even if that short sale transaction has been in process for several months. Additionally, the Fannie Mae approval letters for some of these transactions may state that the transaction must close before the specific date written in the letter or prior to the foreclosure sale–whichever is sooner.
The trend that I have observed is that Fannie Mae (and Freddie Mac) are getting more and more rigid each week with regard to these foreclosure sales. Even if you have been diligently working a short sale for several months and any problems with the process are due to servicer error, convincing Fannie Mae or Freddie Mac to postpone the sale date is like pulling teeth without proper tools (or any sort of dental degree).
So, the question remains: How can short sale listing agents address this matter?
Here’s my $.02
When you take a short sale listing, make sure to immediately ask about whether the borrower has missed any payments. Also, find out whether the foreclosure process has begun on this property. (Read my entitled post Master the Short Sale Transaction for more on this.)
Another thing that you will need to do right away (as the listing agent) is to check whether the loan on this property is associated with Fannie Mae or Freddie Mac. In order to do that, you may need to use the Fannie Mae and Freddie Mac loan lookup tools in order to look up the subject property.
You will want to use the lookup tools for a few reasons. First, you will want to learn whether the investor who owns the note on the subject property is Fannie Mae (6% commission, hurray!) or Freddie Mac. If the investor is either Fannie Mae or Freddie Mac and foreclosure proceedings have begun on the property, you will probably want to advise the borrower about the policy regarding foreclosure sales.
If your client has missed no payments, this entire matter may not be an issue. However, if you are taking a listing with a client who has missed six payments and is inches away from foreclosure (and the listing turns out to be on a Fannie Mae property), then it may be tough to get the short sale approved and closed prior to the foreclosure sale date.
While checking on all of this may feel like just extra things to do when processing the short sale transaction, it seems increasingly more important to provide your homeowner with all of the information he or she may need to make an informed decision about their future. Having the Fannie Mae and Freddie Mac loan lookup tools at your disposal, you will be able to provide your client with additional information about the scope of the short sale transaction.
Please read these other two posts for more information:
P.S. This was a long post. I like to make ‘em shorter to hold your attention. If you got to the end, I really appreciate it that you made it this far, and I hope that the information I provided will benefit you. Keep me posted. Also, the photo has nothing to do with the post… in case you wondered.