Title Companies

Title Companies

When facilitating/negotiating a Short Sale, the importance of picking a Title Company cannot be understated. There are many vital factors to consider when making the decision of who to work with, including responsiveness, customer service, and knowledge of the Short Sale process. Since Short Sales are very cumbersome & unpredictable, the Title Company you choose can make or break the deal.

The first thing to consider when choosing a Title Company is their responsiveness.  One of the first steps when tackling a Short Sale is to order a title search on the Property.  Since the Homeowner is undoubtedly facing a hardship, and there is most likely a foreclosure auction date posted, time & patience are your enemy. As such, it is absolutely imperative that your Title Company realizes the inherent urgent nature of the title search, and completes it as fast as possible.  Many Title Companies either do not deal with Short Sales, or experience very low Short Sale volume; and as a consequence, will take up to twice the amount of time generating the needed documents.

Furthermore, the responsiveness of the Title Company will directly impact the Short Sale progress by way of HUD1 changes & updates.  Each lienholder on Title will have different rules, guidelines, and stipulations for the HUD1 that must be met in order to allow the Short Sale.  Some guidelines are relatively minor, such as specific wording, but there are also major rules that pertain to HUD1 structure, Title fees, subordinate lien payoff amounts, etc. As you are making your way through the Short Sale process, there will be roughly 5 or 6 versions of the HUD1, so an unresponsive Title Company can accumulate weeks of unnecessary delay.

Another factor to consider when choosing a Title Company to work with is their customer service, and willingness to go the extra mile.  This is especially important during the closing phase, since the banks have very strict timeframes but poor response times.  It is a relatively common occurrence in Short Sales to have a small window for closing, and because of this, it is even more necessary to “babysit” the transaction during this time.  More often than not, Buyer’s lenders cannot perform final inspections, appraisals, etc. until the Short Sale approval letter is issued.  Combine this with the small window for closing, means that sometimes final Buyer lender figures are not received until the very last minute.  Additionally, because the Bank requires the final closing HUD1 ≥ 48hrs prior to closing, it is very common to be scrambling late in to the night, finalizing fees & documents.  A good Title Company will realize the time sensitive deadlines, go the extra mile, and assist the transaction as needed, even during their personal time!  A bad Title Company will only work the standard 9-5, and will not recognize the urgency of the request, greatly increasing the risk of Short Sale failure.

Lastly, choosing a Title Company that deals with Short Sales on a regular basis, or has in-depth knowledge of the Short Sale process is extremely crucial. As previously mentioned, many Title Companies do not deal with Short Sales, or have very little experience dealing with them.  Among other things, Title Companies that are not familiar with Short Sales or the process will take up to twice the amount of time as other Title Companies generating needed documents. Additionally, Banks are exceptionally picky & stringent on how the HUD1 needs to be structured & worded, so a significant amount of time can be saved by having a Title Company that knows these requirements.  There are also many fees & closing costs that Short Sale Banks typically will not agree to pay, so a good Title Company will know to preempt the Bank & structure the HUD1 accordingly from the beginning!

In this same vein, all Banks will have Short Sale program/bank/investor specific documents that will need to be signed at closing, and not all Title Companies know exactly how or why these closing documents must be executed.  After all, many Bank specific documents are redundant with the Purchase Contract, Listing Contract, and their addenda.  However, while these documents are seemingly pointless, the Short Sale can & will fail if they are not fully executed. Indeed, as it is not uncommon to be scrambling after closing, getting Bank specific documents signed, due to an inefficient or inexperienced Title Company.

The Title Company is an essential cog in the Short Sale machine. They can make or break the deal with very little ease, due to response times, customer service, and knowledge of the Short Sale process. A bad Title Company can/will cause undue stress, waste time, and prepare insufficient HUD1s; ultimately putting the Short Sale in jeopardy.  A good Title Company, on the other hand, will be the exact opposite.  They will respond to requests promptly, go the extra mile, and have extensive experience in closing Short Sales; consequently becoming an integral partner & team mate to ensure the best chance for success!

HOA

HOA

Anyone familiar with processing & negotiating ShortSales are probably familiar with HOAs, and the problems they can present.  Perhaps the greatest hurdle to overcome or to realize, is that HOAs are not necessarily financially or legally informed about the Foreclosure process.

Without getting into a drawn out explanation about the function & purpose of HOAs, suffice it to say that they are a tool of the neighborhood homeowners, used to “manage” the community.  HOAs are typically responsible for maintenance services (trash, community pool, snow removal, etc.), and are headed/managed by a board of directors, composed of homeowners from the community.  Needless to say then, that the makeup of the HOA board is a hodgepodge of different professional types.  One board member might be a clerk at a grocery store, another may be a minster of a Church, while yet another could be a telemarketer.  Regardless, it is a safe bet to assume that very few of the HOA board members are versed in Real Estate, let alone Foreclosures & ShortSales.

In this depressed economy, more and more homeowners (& their properties) are going belly-up, consequently forcing their HOA accounts into delinquency. Since most neighborhoods have HOA’s, most ShortSales then will inevitably have an HOA lien or two attached to the property.

Naturally, the HOA will try to collect their back-dues from the homeowner, but often times come up empty handed.  This is because the Homeowner is in distress, and is having trouble even making their mortgage payment! Since the Mortgage Company is the big dog with the 1^st position lien, they will tend to get more attention from the homeowner than the HOA; indeed, as the Bank is probably owed more anyway! 

Up until 2005, in Colorado, HOAs were subordinate liens, and were routinely collecting $0.00 at Foreclosure Auction despite the amount they were owed. This is/was a function of the Auction itself; if the 1^st lien forecloses, they are entitled to everything they are due. Only after the 1^st lien collects 100%, will any funds be disbursed to junior liens.  Thankfully for CO HOAs, their lien priority in Foreclosure Auction changed to “super-lien,” putting them ahead of the Bank.  However, even though they have “super-lien” status, It was found in First Atlantic Mortgage, LLC v. Sunstone North Homeowners Association, 2005 WL 427700 (Colo. App.), that total payoffs cannot exceed more than 6 months of regular assessments at Foreclosure Auction, regardless of the amount owed.  The remainder will be wiped out.

As most HOA board members are not familiar with their “super-lien” status, it is the obligation of the ShortSale processor/negotiator to inform them properly, in order to ensure a speedy review of the offer.  Keep in mind though, that the HOA will get 6-months of dues by default, so it is also the responsibility of the negotiator to present an Offer that is attractive enough for the HOA to allow the Sale.

The Short Sale Package

The Short Sale Package

It has been said many times before, but really cannot be emphasized enough:  loss mitigation workers (aka ShortSale workers) are very busy, and will not waste their time on incomplete files. For example, let's say that you are working a ShortSale on a property. You think you have everything you need; you've already aquired a Purchase Contract, & have contacted the Bank. The Seller has verified their ShortSale wishes, and have supplied you with 30+ pages of financial information. The only thing missing is a hardship letter. In this scenario, the ShortSale cannot proceed. There may already be a Phase 1 worker assigned, but they cannot forward or work the file until absolutely ALL required documentation has been received.  Therefore, it's crucial to know exactly what is needed to keep the ShortSale moving, and to minimize Bank review time.

Even though most Banks are different, and will require different things for the ShortSale review, there are a few pieces of Seller information that everyone will ask for. Most important of these are the Homeowner's financials (pay stubs, bank statements, tax returns). Some lenders may require the financial statement or "authorization to release information" to be on their specific letterhead, or require specific information to be included on certain documents, but the Banks will always need current financials. Make sure that you always have the most recent financials from the Homeowner, by having them forward stubs & statements as they arrive.  It has happened too many times in our business; when we think the Bank has everything they need to make a decision.  Lo and behold though, our worker will end up requesting the 2 most recent months of pay stubs & bank statements, which burns valuable time as you run around assembling. Even though the Homeowner's income & expenses stay exactly the same, the Bank worker needs to present a completely current file to their Investor.  If the Homeowner is not prepared for this request by keeping a copy of all their financials, you risk the ShortSale file being closed!  Banks & their workers are very busy, and typically will not hold an incomplete file open for more than a few days.  Generally speaking, if a Bank requests updated pay stubs on Monday, then you have until Friday to supply them.  If you don't comply, the Bank will waste no time in closing the file, forcing you to start ALL OVER.

A typical Short Sale package will contain the following items/documents:

--Authorization to Release Information

--Hardship Letter

--Financial Statement

--Pay Stubs

--Bank Statements

--Tax Returns

--Junior Lien/Mortgage payoff statement

--Listing Contract

--Purchase Contract (including Buyer's Proof of Funds)

--HUD1 Settlement Sheet

A few of the above items can be substituted or waived (ie 4506T in lieu of Tax Returns), but everything must be properly documented. If the Homeowner receives child support, then you will need to supply the payment stubs proving it, and so on. Regardless, there's no way around the need for current & up-to-date financials. Especially that everyone needs them, & when such a minor issue can kill your deal (wasting months), it is 100% unacceptable to not be prepared for this inevitable request.

Bank of America: E-Signatures

E-Signatures for Bank of America

Bank of America recently (Monday, November 19th) issued an update to all Real Estate Agents with "Pre-Approved" Short Sales, saying that electronic signatures are accepted on most documents. Bank of America considers a "Pre-Approved" Short Sale to include HAFA (Home Affordable Foreclosure Alternatives) and/or BoA's in-house CO-OP (Cooperative Short Sale). In addition to participating in one of these "Pre-Approved" programs, the Short Sale must be initiated without an Offer.

This is great news, but arguably worthless. 

Bank of America is a ginormous company, with hundreds of thousands of loans.  With so many loans & mortgages, it is inevitable that a certain percentage of these will go delinquent.  Adding to this inherent "risk," is the servicing of defunct Countrywide loans, as well as other miscellaneous factors ("robo-signing," interest-only loans, ARM loans, etc).  Needless to say then, that Bank of America is inundated with non-performing loans, and as a correlation, their "Loss Mitigation" departments are significantly strained. BofA also has a high turn-over rate, which means more files (& consequently less motivation) per worker.

In an effort to increase Loss Mitigation productivity, Bank of America has steadily been updating & streamlining their processes.  One very fruitful change, for example, has been the implementation of the http://www.equator.com system.  This most recent press release about accepting electronic signatures is the latest enhancement to the Short Sale process.

The "problem" that arises from these numerous Bank issues (# of delinquent loans, # of workers, Loan/Investor types, etc), is that it forces Bank of America to seek help from 3rd party processors, such as ServiceLink, LPS, DTS, LRC, AMS, Promise, REDC, etc.  Of course, there is nothing inherently problematic about a 3rd party processor; actually quite the opposite! The issue is running into conflicting processes & procedures between the different companies. 

For example, once initiated, a "Pre-Approved, sans-offer Cooperative" will most likely be assigned to & processed by REDC, not Bank of America; so one must adhere & comply with 2 separate company policies. Not only will the Homeowner need to verify their Short Sale wishes with BofA's Short Sale department, but also with REDC's Short Sale department.  Bank of America & REDC do not share notes, act relatively independent of each other, and have different rules & procedures.   

One of the biggest & most significant servicing discrepancies between Bank of America & their 3rd party processors (such as REDC), is policy regarding electronic signatures:  BofA accepts them, REDC does not! **At least as of 11/20**  Bank of America's new "E-Sig" policy then, is pointless in this scenario, as they are not the ones actually servicing the loan.  Since REDC does not accept electronic signatures, it does not matter if BofA does.

If one assumes Bank of America policy supersedes their processors', they would be making a grave error in judgment, and will lose weeks of processing time, waiting for clarification and re-signing documents.  In the event that both BofA's and their processor's electronic signature policies coincide, the Agent must submit a fully executed "E-Transaction Consent Disclosure" form, which can be found on Bank of America's website.

All in all, it's great that Bank of America accepts electronic signatures, but it really doesn't matter if their 3rd party processors don't!  

Given the amount of 3rd party companies Bank of America works with, and all their servicing & policy discrepancies, "wet" ink signatures are still the most time effective.  After all, it's better safe than sorry!



**Bank of America, Press Release, Nov. 19:  https://agentresources.bankofamerica.com/ss_news_12NOV19

Short Sale Myths

Short Sale Myths

In the Short Sale business, there are a lot of myths and pre-conceived notions floating around about how they work, or how/why someone will or will not qualify.  A lot of industry professionals will say one thing, while other industry professionals will say the opposite! Generally speaking however, there are no easy answers, and there are NEVER any guarantees. Just like snow flakes, each Short Sale is different & unique! 

Throughout the course of our business, we continually encounter similar questions and/or myths from Homeowners and Agents alike; So we figure we might as well publish a few of the more common myths, to help assist with anyone in a similar situation! After all, these keep coming up, so they must be somewhat common assumptions...

Myth #1: Banks would rather Foreclose on the property than pursue a Short Sale.  

NOT TRUE:   Foreclosure auctions are very costly to the Banks, due to Lawyer fees & Court Costs. In addition to this, there is a good chance the Banks will end up buying the property back at auction (since they are working with bogus values), and so they incur additional “winterization” fees, property security fees (boarding windows, etc), & REO agent Fees. So just looking at costs involved for the Bank, a Short Sale is much more desirable, financially speaking, than a Foreclosure auction.

Myth #2: Once an official "Notice of Election and Demand" (NED) is served, the Short Sale is no longer an option.  

NOT TRUE:  So long as there is a valid Short Sale in place, Banks will most likely postpone any looming Foreclosure auction date, in order to allow sufficient time to complete the Short Sale review.  Combine this with Bank’s preference for the Short Sale over Foreclosure auction, most Short Sales actually end up being worked while there is an active Foreclosure in process.  **Foreclosure Auction postponement is NEVER a guarantee.

Myth #3: A Homeowner must be behind in payments for the Bank to even consider the Short Sale.  ONLY true for FHA Loans:  In order to allow a Short Sale, The Federal Housing Administration requires their loan to be at least 30 days delinquent, prior to date of closing.  No other Loan types have this kind of stipulation; so by and large, this myth is FALSE. In fact, one of the main qualifiers for a Short Sale is the borrower's hardship.  So long as there is sufficient evidence to support the future inability to make mortgage payments, the Bank will entertain the Short Sale.

Myth #4: Financial obligations to the property end at Foreclosure Auction.

May or may not be True: Banks are not in the Real Estate business, and so their main concern is the Loan, and their $$. The Bank does not want the property, and they certainly don't want to deal with the additional costs of Auction.  Because of this, it is fairly common to see the Bank sell the property for less than what they’re owed, and pursue the Homeowner for the difference/remainder.  This is also known as a deficiency judgment. Therefore, It’s absolutely pertinent to contact an Attorney, who specializes in the field, to determine any remaining financial liability, after the Foreclosure Auction takes place.

Myth #5: A Short Sale will automatically be denied if the Homeowner was previously denied for a Loan Modification. 

NOT TRUE:  If for no other reason, this myth isn't true because the Short Sale department is completely separate from the Loan Modification department.  They do not have access to each other's systems, and they do not share notes with each other. Furthermore, a Short Sale is fundamentally different than a Loan Modification:  A Short Sale deals with selling the property, while a Loan Modification deals with keeping the property.  These 2 separate departments have separate notes, and each have their own specific review & qualification process. So if a Homeowner was denied for a Loan Modification, they can still apply for a Short Sale.

Of course this list is no where near exhaustive, and as I mentioned earlier, each Short Sale is different & unique. For any specific questions or concerns, please contact us:  noequitynoprob@gmail.com, or 303.359.4731. 

Bank Timeline & Checklist

Bank Timeline & Checklist

The specific steps that must be taken in order to facilitate a successful short sale, will depend greatly on the Bank and/or type of lien you are working on. For example, WellsFargo will review your short sale offer differently than Bank of America will. A GSE mortgage must be serviced in a different way than would a private investor mortgage.  However, despite all these differences, the short sale review process generally take the same steps. 

1. Verification of Short Sale receipt/request.  Normally, this takes the form of the Homeowner calling in to the Lender, to relay his/her wishes for a Short Sale.
2. Lender assigns Phase 1 worker. After verifying the Homeowner's Short Sale wishes, the Lender will move/assign the file to the Short Sale department, where a worker will be assigned.
3. Verification of required Short Sale documentation. Once assigned to the file, the Phase 1 worker will review all the preliminary Short Sale documentation (Hardship Letter, Financials, etc), to make sure everything is current and that a Purchase Offer is ready to be negotiated.
4. Lender assigns Phase 2 worker. This is the worker who will review the offer, and negotiate the Short Sale terms, on behalf of the Lender & Investor.
5. Appraisal/BPO. Upon assignment to the file, the Phase 2 worker will order a valuation to be performed on the property. This is done so that the Lender & Investor have a good idea of the property's worth.
6. Offer negotiation. The valuation is returned to the Lender. The Phase 2 worker will review/respond to the Purchase Offer presented. This is the point where the Price & Terms for the Short Sale are negotiated.
7. Lender assigns Phase 3 worker. Once the Offer price & terms are negotiated, the Short Sale file is then assigned to a Phase 3 worker (closer).
8. Fees & Closing cost Negotiation. At this point in the Short Sale process, the closer (Phase 3 worker) will negotiate, on behalf of the Lender & Investor, the fees & closing costs that will be covered. Typical fees that Investors usually refuse to pay, are HOA transfer & status fees, as well as final water bills.
9. Lender Approval. If the Offer & Terms are acceptable to the Phase 3 worker, they will submit the file to upper management, for their review & sign-off.
10. Investor Approval. If the Offer & Terms are acceptable to the Lender, they will submit the file to the Investor, for their final review & sign-off.  Once the Investor agrees to the Price & Terms, they will issue an Approval Letter to close.

As previously mentioned, each loan and lien type will need to go through different steps for an Approval, and will vary greatly depending on the lien position & Investor. As such, this general "checklist" fits best with 1st mortgages, and to a lesser extent, 2nd mortgages. Since this is an oversimplified list, it is highly recommended you contact a Short Sale specialist who is familiar with your Lender & State laws.

Tigrent Learning

Tigrent Learning

Contrary to what some would have you believe, the Real Estate business is tough, especially in this market! That’s why it’s important to educate yourself properly on the ins & outs of business management, as well as learning tips & tricks to successful Real Estate Investment. There are many ways to educate yourself, from seminars to books, although the pitfalls of these resources are that they aren't specific to your situation, there’s no follow up, and it’s overly indirect & general. While books and seminars can help you decide which avenue of Real Estate best interests you, it’s still highly recommended to go one step further, and get specific training. By far, one of the best training programs out there is called “Tigrent Learning.”

In an effort to promote successful business strategy & education, “Tigrent Learning” provides advanced training courses to students of Real Estate. Their self-proclaimed goal, “…is to help people achieve their maximum income-generating potential by learning essential techniques to accumulate wealth through real estate investing, financial instruments investing, and entrepreneurship.”

            What makes “Tigrent” so great & unique? Well among other things, “Tigrent” works in collaboration with Robert Kiyosaki, of Rich Dad Poor Dad. The “Rich Dad Learn to be Rich” program focuses on Real Estate investing, with an emphasis on wealth creation. Combine this fantastic curriculum with “Tigrent’s” products and services, and you will be unstoppable. “Tigrent’s” integrated courses are taught by experienced, successful professionals. These guys not only mentor & coach their students through rigorous hands-on & practical Real Estate deals, but also provide invaluable training, resources, and materials. A lot of the mentors started out as “Tigrent” students themselves, so they can speak to the program’s success!

The vast majority of new business start-ups fail within a short period of time. Through proper planning & training though, “Tigrent Learning” gives you the best chance possible of success. How do we know? Ronda & Jorgen were inducted into the “Tigrent Learning, Rich Dad Education HALL OF FAME” in 2010.  We know because we’ve been there!!

http://www.tigrent.com/default.html