Short Sale Revelations by Bank of America. Bank of America has been at the forefront of trying to save face with their handling of the short sale process and Richard Zaretsky's blog on a FL meeting with the powers that be is a MUST read for any homeowner thinking of a Bank of America short sale. Buyers of Bank of America short sales need to be prepared that B of A still believes that 4 1/2 months to reach a closing is a great timeframe! As I have recently discovered with current B of A short sale clients, B of A had previously led these clients down a twisted and unsatisfactory path of loan modification - no success prior to turning to short sales. B of A, according to Richard, appears not to be promoting any loan modification which to my mind is because it is unsuccessful for the borrower. Read and heed. Work with short sale agents that move you through the process and avoid foreclosure especially with Bank of America.
Some of my short sale staff and I met with Bank of America in Miami today at their “Short Sale Summit”. We had a nice small group that met twice this afternoon - and I got to ask and have answered several questions which I think are important to those agents who are working short sales.
THEY SENT THE BIG GUNS
First, we definitely had the top end management for this discussion. Bob Hora is the Short Sale, Deed in Lieu, REO, LandSafe Field Services Executive for Legacy Asset Servicing at Bank of America. He leads a team of 5,000 associates – those that you speak to regarding short sales and deeds in lieu through Bank of America as lender or servicer. Joining him was David Sunlin, Bob’s immediate junior who is Senior Vice President and Operations Executive for Short sales, Deed in Lieu and Real Estate Management for Bank of America – meaning he is in charge of real estate operations for Bank of America’s default loan servicing operations. On a more local side, Matthew McCain is the Home Loans Manager for BoA and his territory is all of South Florida, and he acted as moderator. He is a go to guy for this region (his base is in Naples) and will make presenations to individual agent and Realtor groups if requested.
BoA FAVORING SHORT SALES OVER MODIFICATIONS
It seemed from the discussion, that BoA wants to do short sales more than they want to do loan modifications through HAMP or in house programs. There seemed to be a more significant emphasis toward short sales for avoiding foreclosure than through modifications. In fact, although they flew in about a dozen “expeditors” available for us to share specific file processing issues – none of them dealt with loan modifications. There was zero mention of principal reduction programs.
INVOLVING REAL ESTATE AGENTS IN THE DEED IN LIEU OPPORTUNITY
BoA is seriously floating the idea that if a short sale is denied or a short sale cannot reasonable be consummated, the real estate agent can become involved in the process of a deed in lieu of foreclosure process. This will have some limitations on the degree of involvement by agents as they cannot be forced into an unauthorized practice of law situation. Watch for this to develop over the next several months and for some compensation to the agents for their involvement in the process.
CASH FOR KEYS WITH DEFICIENCY RELEASE TO AVOID FORECLOSURE DELAYS
This is on the front burner for implementation beginning September 2011 - Another program that we should begin to see put into operation is “an aggressive and meaningful” program to encourage homeowners to not ride out a foreclosure process for all its worth (ie: living in the property for as long as possible without paying the mortgage). This is a “cash for keys” type program that more realistically takes into consideration the benefits to the homeowner of the extended foreclosure lawsuit timing vs. a waiver of deficiency rights coupled with a “cash for keys” that takes into consideration more than borrower income, but also loan size and size of home to make this successful – but expect it to be more meaningful than similar programs through HAFA. This may be a huge opportunity for agents to convert to listings those that may have just been sitting out the foreclosure process as a free ride.
DO I NEED TO STOP PAYING MY MORTGAGE TO GET BANK ATTENTION?
Still think that you have to stop paying the mortgage to get a short sale? You are still wrong and this time we heard it not just from me - but straight from Bank of America. Although proving up hardship can be easier with a stoppage of payments (and indeed some investors serviced by BoA require delinquencies ranging up to 120 days before a hardship is deemed “valid”), the specific statement of policy was that delinquency is NOT necessary provided other factors of hardship and imminent default can be shown.
NEGOTIATION MINUTIA AND FRUSTATION WITH NEGOTIATOR DEMANDS
They acknowledged that some of their negotiators sweat the small things (like “we won’t pay for the termite inspection”) instead of looking at the big picture, and they are working on training improvements to even-out the process of analysis and create consistency in the process. Still, there are plenty of quirks in their systems.
“THAT MAKES NO LOGIC” STILL PREVALENT
One expeditor, who was trying to help us on a HUD issue regarding a seller contribution to the closing proceeds, listened to my explanation to my seminar attendees of the issue with “why is the banking thinking this way?” At some of my seminars I have a PowerPoint slide that asks 3 simple questions that can be answered with logic. Everyone get them right and we all agree that everyone applied logic to get a 100% score. I then tell the seminar attendees to take a 10 minute break and go to their cars and lock their logic in their car trunks – and then come back so we can continue the seminar. Logic has no place in the short sale negotiation process. The BoA expeditor (who was from California) said it was the best and most accurate analogy of the actual “without logic” process that she had heard.
RELATION OF CREDIT SCORES TO DEFICIENCY WAIVER
A conflict arose regarding a statement made many times that a low FICO score was a determining factor in obtaining the coveted waiver of deficiency in the short sale approval letter. The conflict was relative to the statement that you can do a short sale without defaulting on the mortgage. David remarked that no conflicting statement was intended, and that waivers can be determined not merely on FICO scores but on other factors as well. Our experience in our office cannot correlate credit scores with whether or not BoA provides a waiver of deficiency.
CONFUSING SHORT SALE APPROVAL LETTER LANGUAGE
We recently received a very confusing approval letter that said both that the lender was reserving its rights to a deficiency and in the same letter that the lender will report to the IRS with a Form 1099 the forgiveness of income from the short sale. Bob took the letter from me and promised a review from their legal staff and a response. The letter is discussed in my article, NEW AND CONFUSING BANK OF AMERICA SHORT SALE "APPROVAL" LANGUAGE.
ESCROWS MAY INCLUDE ASSOCIATION ASSESSMENTS FOR FUTURE LOANS
Lastly, expect some pilot programs on new loans that add on to the escrow list not only real estate taxes and insurance, but condominium / property / homeowner association assessments. The fight to get short sales through is constantly being waged between lender and association. BoA is also considering setting up an association lien subset of negotiators to improve the short sale opportunities even with unpaid association fees. [We maintain that the better course of action for homeowners is to continue paying the association, as unpaid assessments can be the straw that prevents the short sale from succeeding.]
The bad news is that the BoA time-line for short sales still deems 4 and a half months as acceptable. So the educated buyer (educated by their agent?) is a key element for retaining the buyer through the short sale process.
Bank of America actually put together a meaningful program for agents and attorneys that process short sales and the experience was well worth the 3 hour drive. Stay tuned for updates and developments!
Copyright 2011 by Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com
See our easy to find articles at TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES.