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10 Day Short Sale Rule

There is a new US treasury guideline that will, according to a report, mandate that banks make their decision on a short sale in 10 days. The new rule also proposes a $1500 allowance to the seller for moving expenses. I have said before that it shouldn't take a lender more time to decide on a short sale than it currently takes to underwrite a mortgage. The process is virtually the same.

As enticing as 10 days sounds, I don't see how it could be enforced, nor do I see 10 days as particularly realistic. It takes a week for example, to get an appraisal done. The pendulum does not need to swing so far the either way from 4 and 6 month short sales to under 2 weeks. I'd be happy with 30 days, and, frankly, so would the buyers. The banks are overwhelmed as it is, and they don't have the staffing (or so they claim) to speed things up.

So how will they do it? Will this help or hurt? MY fear is that, pressed to make a decision, the lenders will issue denials on deals they might otherwise approve if given a reasonable amount of time.

Please Uncle Sam, some sanity. I would happily take 30 days.

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Posted by J Philip Faranda, Broker-Owner on 01/16/2010 11:23 PM

Comments (43)

Short Sales in the Sales Strategies / Tactics Channel

short sales, 10 day rule, us treasury

Originally posted at: J. Philip's Westchester Real Estate Blog: 10 Day Short Sale Rule

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43 Comments on 10 Day Short Sale Rule

JAN

2010

Hey there,

You are so right, I'm with you on this one. Too much of a reversal in such a short time could make things even worse in the long run.

I agree that 10 days is probably impossible, but 30 would be a welcome change. Let's hope this does start the change in the process.

I'm with you on that. I would be very happy with a 30 day decision. Thank you for sharing this info. Maybe there is some light (however dim) at the end of the tunnel.

Quite frankly I just see the timelines getting longer in most cases. These banks just keep creating unnecessary additional departments, procedures and guidelines. I just had a short sale go through RMV (valuation), quality control, negotiator, investor, back to RMV, back to quality and then back to negotiator for approval. With that many layers, nothing can get done in any reasonable amount of time.

-- Danny

I'm sure BOA, etc are going to be able to cope with the ten day rule! From months and months to make a decision to ten days is probably not going to work but at least the feds are taking notice. I agree that 30 days would be ample time for everyone in the SS process.

My realtor friends and I have had this same conversation. Ten days for most, if not all, lenders will mean an automatic no. Sometimes you wonder if those coming up with the bright ideas have talked with the man/woman on the street...that would be us.

I just can't imagine a 10-day rule working given what the "system" is like right now...And its easy just to say "no!" That will be the knee-jerk reaction. Hopefully though some new regulations will help bring sanity back into the system.

JAN

2010

I'm with Guy on this one. A 30 day rule would sure help things along. The current 90+ days is just far too long.

30 days would be heaven compared to what we have now. I lost a BoA short sale last week because the buyers just couldn't wait any longer without hope.

I agree that the ten day rule may be a little too short but 6 months is way too long.

Let us pray that somehow this really happens! Then it truly would help out every market in the country!

I can't see 10 days either - even though that would be great! But I too agree that 30 days would be wonderful in comparison to 4-6 months. Just glad that the powers that be are taking notice.

That "10 day approval" is a public relations gimmic. That's all it is.

All it means is that after everything is already done, 2, 3 months of review, BPO, loss mitigation analysis, etc., etc., once we're finished with all the delay and nonsense, the last 10 days arrives.

Phil, are you telling me that you did not enjoy our deal that lasted about 6 months of headachs and phone calls? HA, yes 30 days would be amazing!

JAN

2010

I am a fan of the 30 days. 10 days will never happen. Too much too fast. It will just end up disappointing people.

JAN

2010

I would love to have it shorter! 30 days would be fantastic. The last two I closed were unbelievably long. One took nine months and the other five months. The fact that the government is trying to step in to alleviate some of the issues is great! Let's hope they can follow through!

JAN

2010

I think 30-45 days is much more realistic. You have to account for the sheer volume of files, the amount of paperwork to review for each file, oh yeah, and the other non-short sale specialists who may not get it right the first time.

JAN

2010

Nothing is going to change. This is no different than hamp for modificaitons. Someone put a lot of effort into a document and no clout behind it. Great idea but implementation will be a real challenge.

JAN

2010

I agree with Lenn. When does the 10 day rule begin? From the moment they acknowledge the 3rd Party of Authorization or AFTER the 2-3 months of first waiting for a negotiator to be assigned, demands for more documents from the Seller (which includes updated bank statements, pay stubs, etc when the initial ones become old due to the bank taking too long), BPO and/or appraisal? Oh I get it, the 10 day rule applies once it finally reaches the investors hands, right????

I believe the old adage of 'If it sounds too good to be true...blah blah blah'

Ron Tremblay, formerly of Wachovia, was the mastermind behind the Fast Track system for Wachoiva before he left. All lenders need to implement this system. Then and only then can we have a more streamlined way of doing these short sales.

10 days!!!???? Let's get "REAL" here, Uncle Sam. Dumb pronouncements like this one shows a complete lack of understanding of the mortgage and short sale process. I'm with you, if a new mortgage can be done in approximately 30 days(maybe 45?), then that would be a good, logical goal for short sale processing.

This is one of those "I'll believe it when I see it" moments. Like Robin stated, it depends on when the 10-day countdown really starts.

JAN

2010

10 Days does not a little unrealistic, when the previous time it took was months.

Thanks for sharing,

Matt Naumann

JAN

2010

I do not think 10 days is realistic, but i try the new Equator system with a B of A Short Sale and they've responded fairly quickly.

JAN

2010

If you read HAFA carefully you will see this is more smoke and mirrors. GSE 's (Fannie & Freddie) which hold something like 78%of toxic Mortgage Backed Securities are not eligible to participate in the HAFA program. Also those Banks with notes held by private investors are not forced to participate in HAFA, its voluntary.

Second Lien holders are refusing HAFA because it limits their payout to $3000. Why would 2nd lien holders participate when the industry standard currently nets them 10% of the 2nd's balance?????

Please enjoy the read.

https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pd

This Supplemental Directive provides guidance to servicers for adoption and implementation of

HAFA for first lien mortgage loans that are not owned or guaranteed by Fannie Mae or Freddie

Mac (Non-GSE Mortgages). In order for a servicer to participate in HAFA for Non-GSE

Mortgages, the servicer must execute a servicer participation agreement and related documents

(SPA) with Fannie Mae in its capacity as financial agent for the United States (as designated by

Treasury) to participate in HAMP on or before December 31, 2009. In certain circumstances,

Supplemental Directive 09-01 requires participating servicers to consider borrowers for other

foreclosure prevention options, including short sale and deed-in-lieu programs. As a result,

servicers already participating in HAMP must follow the guidance set forth in this Supplemental

Directive, which provides servicers with the option to determine the extent to which short sales

or deeds-in-lieu will be offered under this program.

JAN

2010

I agree with Lenn, this is NEVER going to happen. There is too much at stake and too much to document~~~Kelly

JAN

2010

I agree with everyone who comment on this post that 10 days is impossible. 30 days as majority said would be ideal.

FEB

2010

Well Said! Thanks for sharing.....

FEB

2010

IN HB1359 mandates 7 days to acknowledge receipt of an offer and response by 30 days. Since Jan of 09 (when this law went into effect) it has definitely helped expedite short sales! !! You can file a complaint with both the attorney general and state banking commission if it's violated (we have not had to do this yet :) - fine is up to 2k per occurance. some lenders are not even aware of this IN law, so we fax it over - most will comply after knowing this.

We're surprised most states don't follow suit ?

FEB

2010

Are you kidding? Why my shot sale buyer waited for 5 months to get approved from July 09 to Dec

Grace Keng

30 days would be great but, of course 10 days would be even better. If there was a shorter timeline for short sales, more buyer agents would show these properties-- which would result in a lot more sales!

FEB

2010

While 10 days sounds great, I agree that it isn't feasible in most cases. I worry that the timeline of 10 days may force lenders to reject offers too quickly as opposed to accepting them. They have to give a decision within 10 days- that doesn't mean they have to have the home appraised and the file thoroughly reviewed as that won't likely happen in 10 days. I think we could see something as simple as an automated zillow like service that formulates a value a home should sell for and automatically rejects offers below that amount. Hopefully, I wrong.

Doesn't this start April 1st? April fools day?

FEB

2010

I think they mean the 10 days apply after the seller has applied to and been accepted into the HAFA program -- which is after a loan mod has been denied and all the docs are received. So the bank has already reviewed the seller's financials, bank statements, hardship, and it's received and reviewed the BPO. The only things the bank has left to do are approve the buyer's offer, HUD and look over the prelim at that point so, no, it shouldn't take longer than 10 days.

FEB

2010

That 10 days is workable if it is 10 countrywide days. The "ten days" in Countrywide language means 10 business days which excludes Saturdays, Sundays, Holidays, Tuesdays, Thursdays, and Fridays. I know because it's always closer to 35 actual days when countrywide says something will happen in 10 days.

FEB

2010

Jeffrey SMith's comment is spot on!!!!!! The 10 day rule -- More government BS......telling people what they WANT to hear rather than reality.......the EASY out for Servicoers is CLAIMING to not having the "complete and updated" short sale package.

Don't hold your breath on 10 days....use someone familiar with the process, with contacts up the food chain, and you will be fine, make more money, and help more homeowners.......Good Stuff.

Sincerely,

Ben Benita, Expert Negotiator, www.United-IG.com and www.BestShortSaleService.com

FEB

2010

I would be happy with a 60 day. My 120 day process is getting old. Very frustrating to complete these without any issues.

FEB

2010

How do they get all the banks to cooperate? Most of the new guidelines are just that - suggestions, right? I'd be happy w/ a 30 day time frame.

FEB

2010

If, as you wrote, "it shouldn't take a lender more time to decide on a short sale than it currently takes to underwrite a mortgage", then I don't see 10 days as being totally unrealistic. Most home loans can be approved in 10 days, but not all. However, in California, if a loan isn't approved in 17 days, then the buyer may back out. I would think that 17 days would be very achievable by most lenders to approve a short sale.

MAR

2010

How can it possibly be enforced. They can't handle the short sales they have now. I think it will just force the banks to deny short sales.

MAR

2010

I think that it is 10 days after they have the entire package, the BPO, and after they submit the counter offer to the buyer. So, basically it is a slightly shorter time period from counter to approval.

MAR

2010

I'd even be happy with 10 WEEKS! Pfft! I'm waiting for approval since the beginning of January... patiently... 10 days is impossible... I agree it's not enough time. 30 days would and should be ideal... or better yet a deal :)

~ Vienna

APR

2010

Like with everything else you hear there is more to it. Page 5 of the Making Home Affordable, Supplemental Directive 09-09 ( https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf )states;

"Prior to approving a borrower to participate in a HAFA short sale, the servicer must determine the minimum acceptable net proceeds (minimum net) that the investor will accept from the transaction. Each servicer must develop a written policy, consistent with investor guidelines, that describes the basis on which the minimum net will be determined. This policy may incorporate such factors as local market conditions, customary transactional costs of such sales, and the amounts that may be required to release any subordinate liens on the property. A servicer's policy for determining the minimum net must be consistently applied for all loans serviced for that investor. The minimum net may be expressed as a fixed dollar amount, as a percentage of the current market value of the property, or as a percentage of the list price as approved by the servicer. Once determined, the servicer must document the minimum net in the servicing file for each property subject to HAFA."

Translation: The minimum price the lender will accept must be determined when the borrower applies to be in HAFA not after the package is submitted.

JAN

2011

Go 30 days!!! That would be awesome.

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J Philip Faranda, Broker-Owner

Briarcliff Manor, NY

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J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY

Address: 522 North State Road , Suite 100, Briarcliff Manor, NY, 10510

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J. Philip Faranda is based in Briarcliff Manor, NY. His market covers Westchester, Rockland, Putnam, & Dutchess counties. Almost 100 clients and customers had closed transaction in 2009-2010 from his efforts. Ever the high-producing listing agent, he counts among his specialities hard to sell properties & short sales. You can reach him at (914) 723-8900.

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