Wednesday, January 21st, 2009 at 7:07 PM
Pre-Short-Sale Pricing
Fannie Mae tests ‘short sales’ as alternative to foreclosures
ORLANDO, Fla. – Fannie Mae has launched pilot projects in Orlando and Phoenix intended to reduce foreclosures by pre-approving short sales – agreeing on a price and the loss the bank will take prior to a deal even being made. Fannie Mae hopes the program will improve the popularity of short sales with real estate agents, who now tend to shun such deals.
Property professionals initially welcomed short sales, but soon found the process to be a frustrating one. Thanks to squabbling about the sale price and slow approval times by the mortgage companies, many short sales often ended with no sale at all.
“Short sales have received such a bad reputation among real estate agents that, as a portion of the overall mortgage market, they have gone down,” confirms Tom Popik of the research firm Campbell Communications, whose November survey of realty practitioners found that agents had to wait as long as 8.1 weeks to receive a response from the lender on a short sale – nearly double the 4.5 weeks the process took earlier in the year.
Fannie Mae’s pilot program focuses on homes listed at less than the mortgage balance that carry a Fannie Mae-backed loan serviced by Countrywide Financial Corp. If successful, the pre-short-sale pricing concept could be expanded to other geographical areas and additional lenders.
There are concerns, however, about the program’s success, with real estate agents noting that property prices could decline before the pre-approval is issued.
Posted on Wednesday, January 21st, 2009 at 7:07 PM in Uncategorized | 9 Comments » | 
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Let’s see, as the Bank, should we try to limit our loses in a declining market by actually selling them before they lose more value?
Should we try to actually encourage people to buy the asssets we wish to be rid of?
Should we have the courtesy to even respond in a timely matter to offers–indeed, even give the power to make a decision to someone remotely in contact with the potential buyers?
DUH!
Interesting that this pilot is being done when serviced by Countrywide–some BofA benefit?
Would this count toward BofA’s loan remods? I think not. Will they have enough people to work this issue? I thought all hands were pulled on deck to make sure their remod numbers were in line by March…?
shoppingaround | January 21st, 2009 at 7:34 pmI could not agree more. I always begin looking at any business action with the assumption that whoever does it is rational. I have often wondered why banks will not respond to a short sale proposal in a timely fashion.
Still I am not ready to conclude that banks are continuing to hold non performing loans on depreciating assets out of stupidity.
I would love to hear from someone with inside information about the delay in making a decision. I predict it has something to do with the way loans have been sliced and diced and resold. It is probably very difficult to decide exactly who has the authority to make a decision.
It is hard to believe that it is pure institutional inertia.
Norman Hamlin | January 21st, 2009 at 11:58 pmI’m not an insider, but every anecdote I am hearing seems to indicate that –to borrow your phrase–institutional inertia does seem to be in play here. (Having worked for AT&T back in the days when they had a million employees, I can tell you “ii” runs rampant in huge conglomerants.)
Besides the “ii” issue, add in the merging of big players like Countrywide into BofA (can you spell “turf war?”), and the shift from leaders-who-could-make-profits-by-ignoring-all-the-rules back to leaders who are (at least) attempting to do things “the right way,” plus add in a few little worldwide econmic problems and you have a perfect recipe for making stupid decisions.
I followed a home that went into foreclosure. The owners got in way over their heads and owed money to too-many players to get any agreements on short selling, so it collapsed into a foreclosure. Took the bank a couple of postponements to finally take it back officially on the courthouse steps.
Then more than three full months to put it onto the market to sell. We were told that “a computer assigns the realtor for listing;” so, 20 calls later, we found someone who actually told us which realtor would get the listing (a miracle–someone KNEW something!), but she “wouldn’t have it yet.” Of course she did indeed have it when we called her. (Classic example of “the left hand not knowing what the right hand is doing”–so common in monster corporations!) Another few weeks to get get all the paperwork, etc. lined up to get it into the MLS. Then it was still overpriced. And it sat. Sits there still.
shoppingaround | January 22nd, 2009 at 4:52 am“Duh” is right. It took them this long to realize that putting something up for sale without first deciding what price you’ll accept for it is a bad idea.
GeneK | January 22nd, 2009 at 8:50 amIf there is only one loan on the property I can see the short sale method being effective. But how many properties have piggybacks & HELOCs & ? It was mentioned that it might be difficult to find the decision maker on one loan, what if there are 2 or more? I would think that it would add a lot of difficulty to get the juniors to take a big enough hit for the short sale to make sense to the first rather then just wiping them out through foreclosure.
KeithM | January 22nd, 2009 at 8:50 amMy prediction: these programs will end in a bunch of “pre-approved short-sale prices” that are above actual market prices.
Which brings us back to where we started…
greenlander | January 22nd, 2009 at 10:11 amNow if they offer 3% conforming, 4% jumbo 30 yr fixed rates that would solve some of what’s wrong too. Formula = 2006 price minus 35% is approved as short sale price. Cut our Escrow fees, closing costs, points, cut out all the associated BS. The lender and agent can hammer out a deal at 2% comm. Paid by the lender.
doughboy | January 22nd, 2009 at 10:44 amhey, hey, wait a minute – let’s revisit that commission talk!
Jim the Realtor | January 22nd, 2009 at 1:33 pmListing agent 2% and selling agent gets 2%! Revisited! Maybe some of these low low end REO should be 10%? 200k sale, 20k in commissions split buyers/sellers ageants? Same amount of work goes into 1M sale as 200K. From your videos and stories Jim, the 200k REO’s is more work with clean up and evicting squatters and risking you health and well being!
doughboy | January 22nd, 2009 at 2:13 pm