One Of The Country’s Most Experienced Short Sale Law Firms

The fastest way to foreclosure is to call up your Loan Servicer and do exactly what they say

What? How can this be? Customer Service is there to help, right? Wrong!

Let’s break it down:

  • The Loan Servicer most likely does not actually own your loan, they are merely servicing your loan. Example of Loan servicers are BOA, Wells Fargo, Citi, Chase, Mr. Cooper, SLS, SPS, SunTrust, Loan Care, Cenlar, Caliber Home Loans, DiTech, PHH, Seterus, Shellpoint, Quicken, etc.
  • Because the Loan Servicer does not own your loan, there is no great negative impact on them if it goes to foreclosure…especially since if the investor prefers foreclosure to short sale. Examples of investors are Fannie Mae, Freddie Mac, FHA, VA, USDA, other banks, investment funds, etc. In today’s market there is a very obvious and powerful push to go to foreclosure instead of short sale.
  • When you call up your Loan Servicer you are talking to a person on the phone bank giving you information from the screen of their computer. If you say the words “Short Sale” they will read you the script that says that you need to send them 5 documents immediately. They have no authority, will never talk to you again and do not actually know anything about short sales. More importantly, they are not in the Loss Mitigation Department, which is where short sales happen.

So, the homeowner sends them the five requested documents, which triggers the ‘valuation’ step. The loan servicer sends an appraiser or BPO agent to the property to establish the present market value for the property. This is often just a drive-by valuation. The listing agent, if there is one at this stage, is not contacted and the valuation of the property is established without any input of the agent. This often results in a valuation that is substantially higher that the real market value for this property, and certainly more that buyers are willing to pay in a short sale. If that is the result, then there cannot be a short sale for this property until the loan servicer revalues the property in six months. Game over.

However, let’s just say that the valuation came in with a realistic number. The homeowner is then told to get an offer at that amount and send that offer to the loan servicer and they will begin the short sale review process at that time. If the Homeowner does not send an offer in the next 2 – 3 weeks the file is usually unceremoniously closed. The only thing that has been accomplished at this point is the value has been temporarily established. The agent can now market the property for that price point.

So, where we are at this point in the short sale process? The answer is that the homeowner is actually nowhere near an approved short sale. In order to get a short sale approved, the homeowner will need to have the property on the market with a real estate agent, submit a market price offer at the established value, and send 25 documents to the loan servicer in order to even have a file set up in the Loss Mitigation Department for review. This review will take 60-90 days if you know what you are doing, 6 month+ if you don’t.

In the meantime, the foreclosure is in progress and coming down the track undaunted. The homeowner, however, is lulled into a false sense of complacency because they have been told by the person at the Loan Servicer’s phone bank that they are in the “short sale program.” The homeowner believes that since they are in the short sale program the foreclosure will be stopped. Wrong!

Let review a couple of other important facts:

  • Submitting a short sale package to the Loan Servicer for review does not necessarily stop a foreclosure. The Loan Servicer will usually not stop a foreclosure temporarily until after the several steps in the short sale process are complete, including receiving a complete 25 document short sale package. This usually takes at least a month.
  • Rule X of the CFPB (Consumer Finance Protection Bureau) guidelines state that the Loan Servicer must review the short sale package if it is submitted at least 37 days prior to the foreclosure sale.

So if the homeowner gets it together and submits an offer more than 37 days prior to the foreclosure sale date they are still going to run into serious resistance unless it is a complete perfect short sale package (i.e. market price offer and 25 documents requirement). If it is not a complete short sale package bank will send out document requests for the missing documents, drag their feet until the 36th day and then close the file because the foreclosure sale is now too close to do a short sale.