In a short sale, it’s a pretty common question to ask whether or not, Does Freddie Mac Pursue Deficiency Judgments? Luckily for us there’s a clear definition already out there for this.
Chapter 55.3.1: IRS Form 1099-C, Cancellation of Debt (04/25/06) states that the Servicer must report cancellations of Borrowers’ mortgage debt on IRS Form 1099-C, Cancellation of Debt, as required by the Internal Revenue Code. Under 55.3.1.d .6 it defines a short sale (not by name) as “A discharge of indebtedness under an agreement with the debtor to cancel the debt at less than full consideration.
Most of the time you want to get it in writing and possibly reviewed by an attorney but this is pretty clear that a short sale completely cancels the debt. The way it’s worded above, it’s worth pointing out that your credit report often reports a short sale this way as well.
Seterus Short Sales are thankfully much more rare than many other “servicers” or banks. Seterus is one of those “banks” that is more like a credit union or small group that doesn’t think Short Sales deserve the attention of their staff or processes. After all, Seterus doesn’t make money on short sales, so why bother. Most often you’ll have to escalate or find work around when dealing with them . Allow up to 4 months from the initial offer from a buyer to an approval letter. You can (we have) close with them, but don’t expect it to be a smooth ride.
Over the years, the Bank of America Short Sale process has gone through many changes. From being one of the worst in the industry to being one of the better ones. They’ve added equator, added twitter support and now they’ve added Dignified Transition Solutions as an outsourcer. In addition, they are now also trying to interfere with our listing process, telling us to list properties as ACTIVE that are clearly under contract. Too good to be true would be what could be said about Bank of America Short Sales. Often they take around 90 days from start to approval letter if everything is followed, sometimes it is much faster and other times it’s not. The only thing that can be said about Bank of America Short Sale processes is that they are only a servicer most of the time, not the actual investor.
Dignified Transition Solutions Short Sale Process is a new one relative to others. In our experience they are a third party that Bank of America has outsourced some of their short sale and other loss mitigation services to. For the most part, the staff at DTS is generally more amiable and ready to attempt to help. However, a round of phone calls in a day will reveal that their staff lacks the experience and often will add days if not weeks to the short sale process. Keep in mind though, that these delays won’t be due to negotiations, but just inexperience which makes it somewhat frustrating.
In our experience Dignified Transition Solutions works with a majority of FHA Short Sales. This process should be easier, but unfortunately, as mentioned above, their inexperience and overall lack of urgency can really wear out a client. They sure are friendly though.
Expect at least 4 months from start to approval letter if you have a DTS short sale.
We’ve gone and updated many of our “takes” on the banks and one of the first ones we want to release is the Wells Fargo Short Sale Process Update. Overall, Wells Fargo hasn’t changed a whole lot in the past 5 years. They do use equator now for most of their files. (Equator is a software that a few banks use for short sale processing). Wells Fargo can be counted on to take 60 to 90 days to get an approval letter. We have not lost a short sale to foreclosure with Wells Fargo in the past 3 years or so. This is one of the reasons we like the Wells Fargo Short Sale Process, as they are a bit more forgiving than some of the other lenders.
A few days ago we covered, What Is The Difference Between A Loan Servicer, Investor and Lender? today we’ll basically be doing a “part 2.” Many time servicers will transfer or sell the rights to a loan. So you might ask What Happens If My Loan Sold? If you’re current on your loan then there’s no need to stress, nothing really happens. However, if you are with Bank of America for instance and you are in a short sale process, then you should be aware.
Bank of America services mortgage loans for hundreds of investors. As a part of normal servicing, investors may decide to release or transfer servicing from Bank of America to another company. Servicing may be transferred on first, second or stand-alone liens. In most cases, once the servicing transfer occurs, the short sale process ends with Bank of America and the homeowner must contact the new servicer to determine what foreclosure alternatives may be available.
Keys to remember if you are doing a short sale.
Some key activities that may occur during servicing transfer:
All lenders should send a letter 15 days before the transfer date.
If you are with Bank of America, then they may call the agent to advise of the impacts to the short sale.
The new servicer will send a letter or statement advising the homeowner where to send payments.
If an offer has already been accepted on your short sale, a closing has been set and an approval letter issued, the new servicer will determine if the short sale will continue. [In other words, you’ll be starting over, but hopefully “fast tracked.”
What Is The Difference Between A Loan Servicer, Investor, Lender and Bank?
What Is The Difference Between A Loan Servicer, Investor and Lender?
This entity is essentially like a “property manager.” They simply collect the payment and process it. They also act as a buffer between the home owner and the “investor.” Most loans have “servicing rights” that can be sold. So the owner of the loan can retain these rights, sell them or have companies sell and transfer these rights to one another. This is why sometimes home owners will get a notice that they need to write payments to another “bank.” Bank of America is the largest servicer of loans in the world, yet they don’t own most of the loans they have.
Loan servicers are the ones that handle your short sale file for the most part, at least initially. Keep in mind they are usually located in a cubicle in another state, so they won’t know the difference between Georgia Real Estate laws and say, Florida Real Estate Laws.
This “entity” isn’t the same kind of investor that you are likely thinking of (the kind that “invests” in buying homes). Fannie Mae, Freddie Mac, FHA, and Bank of New York are all “investors.” Investors are sometimes lenders, sometimes banks but not always. In a short sale, the investor is the one who “owns the paper” or owns the mortgage.
In a longer more convoluted answer, when you got your mortgage, it was put into a “pool of loans” then sold to an investor while the “servicing” rights were sold to another party. To add to the confusion there’s also parties that “back” or insure the loan.
This entity “lends” the money. Most home buyers will confuse this one with “bank” and many times it is the bank but not always. The lender then can keep the loan or sell the loan as a package. When you hear mortgage professionals speak about “fannie mae guidelines” then you know they are doing a loan and it will be sold to fannie mae. They may retain servicing rights or sell those as well.
This isn’t so much as an entity as it is often a misnomer to describe who you are dealing with. A bank could be a lender or an investor or a loan servicer or all three.
What Is The Difference Between A Loan Servicer, Investor and Lender as it relates to a short sale?
When you start your short sale process you start by talking to the loan servicer. Often they will take your package and evaluate it. In many cases, they will know if they can move forward but in some cases all they do is put the “file” together. From there they send it to the Investor for approval. If the investor approves the short sale, they will send it back to the servicer.
If you caught all of that then you also need to know that in that exchange there may be little things that either the investor or the servicer will do to hinder your short sale.
Keep in mind that servicers can sometimes get paid to “service” the loan whether you make a payment or not. If they are getting fees for your loan they might be inclined to drag their feet.
We’ve answered this before but we did want to update what a short sale is in Georgia just to be clear. After all it’s been 4 years of short sales in Georgia. The definition is still pretty much the same:
The short sale in real estate is where the lender/investor/bank lower’s their payoff (what is owed) to allow the sell of the home to a buyer at today’s (lower than what home was purchased for) market value.
We’ve talked a lot about the Bank of America Short Sale process over the years, but they continue to be slowing improving their processes, almost to the point of being the preferred lender to do a short sale with. Unfortunately, that distinction won’t help them a ton but will help home owners get over their fear of the short sale process. They recently made a few changes to their process.
One of the biggest problems with short sales is that the home buyer tends to get antsy and decides to buy something different. This usually causes the short sale “processor” to have to start over. (more…)