Realtors Briefed on Short Sale and Foreclosure Valuation Improvements

Several speakers representing lenders, servicers, and appraisers spoke to Realtorsrnattending their Midyear Legislative Meetings in Washington on Wednesday aboutrnsome of the issues that have arisen around short sales and property valuation.  </p

Tim McCallum, Fannie Mae’s director of short sales, gave a short course on thernimprovements his company has made to facilitate short sales which continue tornrepresent a significant portion of the real estate market – accounting forrnabout 9 percent of sales during the first quarter of the year.  McCallum said the short sale process can bernfrustrating for buyer, seller, and Realtor because the approvals are oftenrncomplex, inconsistent, slow, and cumbersome. rnBut, he said, Fannie Mae is improving transparency and has created arndedicated team to negotiate short sales with real estate agents.  </p

Other steps to streamline the process include ordering a valuation as soonrnas the owner indicates he wants a short sale rather than when an offer isrnreceived.  If the servicer doesn’trnrespond to an offer within 30 days, the case can be escalated and Fannie Maernexpects every short sale offer to be countered. rn</p

A foreclosure can be postponed if a short sales offer is received in arnreasonable amount of time, preferably at least two weeks from a scheduledrnforeclosure, McCallum said, and the company has created a web-based channel tornhelp agents escalate short sale issues and track their resolution. </p

Bob Martin, vice president of valuations at Fannie Mae, said they also haverna dedicated team to value all foreclosed and short sale properties.  The team includes 2,000 appraisers around thernU.S. who can produce valuations in their local areas within three weeks.  Fannie Mae also uses Broker Price Opinionsrnand data from other sources including current listings, pending sales, and soldrnproperties, Martin said.  </p

Under a new policy announced by Fannie Mae late last year to guide short sales,rnafter a borrower contacts their mortgage servicer to determine eligibility, thernbuyer and their agent receive a recommended list price and have the opportunityrnto respond to the valuation.  When anrnagent submits an offer Fannie Mae may review, and if approved it will proceedrnto closing.</p

Borrower eligibility requirements vary, but if a borrower is 90-days or morerndelinquent, and has a FICO credit score under 620, then no documents, hardshiprnor contribution are required to qualify for streamlined documentation. Otherrnborrowers must have an eligible hardship, such as unemployment, reduced income,rndivorce, death or disability.  Even arnborrower who is not delinquent may qualify for a short sale if at risk ofrnimminent default and should speak with the servicer.  In some cases relocation assistance isrnavailable to the seller.</p

Mark R. Johnson, senior vice president at Lender Processing Services Inc.,rnsaid loan failures in the past five years continue to have reverberations.rn”Under the Dodd-Frank Act there can be no undue influence on appraisers, theyrnneed to be paid customary and reasonable fees, and each state must implementrnlegislation for Appraisal Management Companies, which includes a reasonablernseparation between appraisers and clients.” To date, 37 states have passedrnAMC legislation, and the remaining states have until 2015 to implement. </p

Although clients and real estate agents technically may communicate withrnappraisers, many lenders have their own rules. “It’s a good idea to provide thernappraiser with documentation about comparable sales, facts about the home andrnlocal market conditions prior to their examining a property,” Johnson said.</p

Martin Wagar, chief operating officer at Midwest Appraisal Management Group,rnsaid it’s important to match appraisers with the location of the property beingrnevaluated. “AMCs need to improve the appraisal process and not get in the wayrnof the transaction,” he said. “Appraisers must have local competency to producerngood appraisals.”  The Consumer FinancialrnProtection Bureau will ultimately regulate AMCs, he said, but hasn’t yet releasedrnany guidelines.

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