The new federal guidelines designed to speed up the short sale process, otherwise known as the Home Affordable Foreclosure Alternatives program, will likely pressure banks and mortgage lenders to provide the one-answer homeowners and their real estate professionals do not want to hear: NO!
Pressuring banks, credit unions, and mortgage lenders into a timeline of 10 days to process a short sale is completely unrealistic, especially since the federal government has failed to address the root causes of the lengthy delays of the short sale process in the first place.
Most of the delays in getting short sales approved are largely due to lender inefficiency and government bureaucracy.
Loss Mitigation Specialists charged with reviewing and approving most short sale requests by their respective bank, credit union, or mortgage lender are woefully undertrained in even the most basic underwriting skills, as well as inundated with hundreds of short sale requests. Banks, credit unions, and mortgage lenders would be better served to hire experienced mortgage loan underwriters, using underwriting guidelines set forth by Fannie Mae & Freddie Mac, to process their short sale requests. Increased staffing of these specialists would also be a huge plus to improving the short sale process.
Mortgage loans guaranteed or insured are another reason for the lengthy delays in the short sale process. The Veterans Administration (VA), Federal Housing Administration (FHA), and the United States Department of Agriculture, charged with guaranteeing or insuring mortgage loans, often have the final say in whether or not a homeowner will be approved for a short sale of their home. Anyone who has dealt with the federal government already knows the pain-staking processes one has to go through to accomplish even the smallest of tasks. There are simply too many hurdles to overcome in a reasonable period in getting a response on a short sale from these loan guarantors/insurers. A streamlined process of communication between banks, credit unions, mortgage lenders, and their respective loan guarantors and insurers would go a long way in speeding up the short sale process.
Last, differentiating between homeowners who qualify for a short sale, and those who do not, also delays the short sale process. Homeowners having little or no difficulty in making their monthly mortgage payments, but still request a short sale of their home simply because their saddled with more debt than their home's equity can support, are hindering the short sale process for those homeowners in true financial distress from getting their short sale request approved. Setting a minimum standard for homeowners to qualify for a short sale, as well as discouraging those homeowners fully capable of making their monthly mortgage loan obligation from applying for a short sale would certainly improve the process of helping those homeowners truly in need of assistance.
Everyone wants a faster short sale approval process, but identifying and recognizing the root causes of the delays of the short sale process should be addressed before truly meaningful timelines for getting a short sale approved can implemented or even suggested.
Mike Sikorski MBA, GRI
Licensed Real Estate Broker
MLS of Florida Realty Corporation
22079 Kimble Avenue
Port Charlotte, Fl. 33952
(941) 206-6000
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