Short Sale Proposed Solution for Quicker Bank Response Times

Here are a couple of problems I see with this just off the bat:

1. You are putting the burden upon the banks in the short sale, instead of the person asking for the short sale (the seller).A short sale is a privilege, not a right.

2. Like you already mentioned, a deed in lieu already relinquishes property rights and ownership. So what you are basically asking for is a deed in lieu without the ramifications of a foreclosure.

The real solution was not to bail out the banks. SMIs need to make the demand for efficient short sale procedures and processes from their servicing lenders. With the bail outs, they no longer have the motivation to do so.

We, as real estate agents, should respect property rights. This includes holding the public and the banks responsible for their own situations and allowing free market to dictate the process.

I can't say I support giving any more control to the banks...I am hoping the new short sale guidelines will speed things up...time will tell.

It is not an issue of modification as mentioned above.  It is about a better way to do short sales, if you have to do them.  I think it is an idea with some merit.

Ya know, it is so hard to decide which way to go here. Short sales are better for sellers and for banks however the ridiculous amount of time that it takes to get these banks to approve a short sale makes them bad for buyers, unless you have a very patient buyer.

If more homes were sold at short sale being that most of them are sold at fair market value then it would benefit everyone. Foreclosures do not benefit anyone, except maybe the Attorneys involved in processing them.

My latest short sale took 3 months just to get the bank to accept doing the short sale at a reasonable value. They ordered a BPO which came in ridiculously high and it took the PMI company getting involved and ordering an actual appraisal to get them to accept fair market value. Once they accepted that and approved the short sale at that value then we began to "roll" on the short sale itself.

Who takes the brunt of the loss however? Can our banking systems continue to handle these kind of losses. We have lost so many banks already.

There must be a workable solution for all - Somewhere - Somehow. Until we find it, none of us will recover/stabilize.

Loan modifications could be a great solution if only the lenders would do them, and do them quickly, and within reason. I've seen to many homeowners who would have been happy to extend their mortgage by 5 years or so if only they could stay in their home, the home they love so much.

I think the best solution is for all of the banks to take the Wachovia lead and actually focus on getting these homes sold.

Jim,  In this case, by investors, I meant the company that actually holds the note.   The current set up for most of these defaulted loans reminds me of how a mortgage broker originally funds a loan.   Broker is the middleman who ultimately has to get approval from the actual banks underwriter before the loan gets funded.  I prefer to deal direct with bankers to fund my loans as I know I am dealing with the decision makers and if my Loan Officer needs to get a complicated deal approved, no one has better access to said underwriters (decision makers) than an LO working directly for that particular bank.   

In the case of short sales, the set up appears to be similar(most of the time).  The servicer, like the mortgage broker above, is just the middleman that has to ultimately get a short sale approval from the actual note holder.  They sign what is called a servicing and pooling agreement.   Each servicer has a different agreement with each bank they service the loans with.  Because of the volume of defaults, there is no way these loss mitigators at the serivcer company know what the servicing and pooling agreements say for each and every loan.  This is part of the time consuming problem.   If we could just deal directly with the note holder the deals would go much faster.  

As an example, when I get a short sale with say Wells Fargo as the servicer of a note ultimately behind held by Merryl Lynch and it also has Mortgage insurance, those type deals always take longer to do than if the note was actually held by Wells Fargo themselves with no MI.  In this scenario, Wells, as the servicer approves it, then it gets passed to Merryl Lynch, the investor, who may or may not approve it, then if approved, it gets sent to the MI company, who may or may not approve it.   This process seems to add, at least, another month to the process.

If we could deal direct with the ultimate decision maker it would really streamline the process.  But, that is living in a dream world!  Slap me back to reality please!!!  lol  

IMHO, Lenders are spending too much time trying to stop investors from making money and not enough time approving short sales and moving on to the next file. So, I also have a huge problem with your #2 after banks assume control.  

The lender may have control over wether they want to accept a short or not but I do not want them acting as if they are the seller and they already hold title.  If they want that, let them foreclose and incur the costs involved.  If they are going to accept a short sale based upon their own independent valuation, then investor buyers (Trump types) should and do have every right to make a profit.  It's unamerican to suggest otherwise.  Capitalism has to work for both the big companies/lenders as well as small companies/individuals otherwise it is not capitalism at all, it's Communism!

Lenders and our government caused this problem, why should they be the only ones allowed to benefit and make money?  

What about the buyers/investors out here?  Who's looking out for them?   What about their right to make/EARN (key word is earn) a profit?   if not for them, things would be even worse.  How many short sale listings do you think would still be for sale if investors did not make offers on them and were willing to wait the 6 months to a year, sometimes more to get an approval?  An end user buyer comes in and is willing to pay more only because they do not have to wait to get a clear title.  That clear title is worth something is it not?  All the effort and time the investor puts in is worth something is it not?

I deal with a lot of cash rehab investors who, like retail buyers, do not want anything to do with short sales because of the time it takes to get approvals. They don't want their money tied up in what if/maybe scenarios.   They want to be able to buy and close immediately so they can keep their capital moving and working for them.    

The small amount of investors out here who are willing to buy short sales, follow the law and wait it out should be looked at as the saviors and partners in all of this, not the enemy. 

Your plan has my vote

Cash for keys is the process I know of. Get out, here's some money to move. The short sale process is a double edged sword if you ask me. I know how the buyers feel and the sellers.  There are many posts in which buyers just give up and take a hike, I can't blame them even though for the most part I'm a listing agent.