Continental Title Company News & Events

  The Skinny on the Short Sale

By Tara-Nicholle Nelson, Esq., FrontDoor.com | Published: 2/01/2008

There are many flavors of compromise you can strike with your lender if you are facing foreclosure. One of the toughest to execute is the short sale.

What Is a "Short Sale"?

The title "short sale" is somewhat misleading; many assume that "short" means quick, implying a transaction that has a short escrow period. Au contraire. A short sale refers to a homeowner's sale of their home for a net sales price (after commissions, closing costs, etc.) that is less than what the homeowner owes their mortgage lender(s).

Why Is a Short Sale Desirable?

A short sale is an alternative to foreclosure. A short sale prevents you from having to go through the foreclosure and eviction. A short sale does make a smudge on your credit report but is much less traumatic to your credit than foreclosure.

What Makes a Short Sale Hard to Complete?

Because a short sale results in the lender losing (a) funds they are owed and (b) the property which secured the mortgage loan, these transactions must be done with the full participation and agreement of the homeowner's lender(s).

Lenders are institutions, not people. They often move at a snail's pace when evaluating a request for a short sale. Short sales are more frequent in a declining market -- many lenders are simply not equipped to handle the deluge of short sale requests they receive.

Realtors who work on short sale transactions all have stories of trying for weeks to get the short sale "package" to the correct person in the loss mitigation department! Once the package is in the hands of the right person, the bank may have some reason they disagree with the deal between the buyer and seller, and may insist on inserting the bank's price increase, reduction in closing cost credits, or other major alteration of the terms of the deal.

During a short sale, the buyer, seller and even the real estate agents are somewhat subject to the whims of the bank -- the deal cannot be done without the bank's agreement.

How to Get Your Lender to Agree to a Short Sale

With all that said, short sale transactions are completed every day! Because the lender is likely to take so much time processing your short sale request -- and because time is of the essence -- you must ensure that your short sale request itself is as articulate, thorough and persuasive as possible. Here are some concrete actions you can take to maximize your chances for success.

1. Approach your lender as soon as you think you might need to request a short sale.
If you are struggling to make your mortgage payments, list your home with a reputable real estate agent as soon as possible. If they advise you that your home is likely to sell for less than you owe on it, immediately contact your lender's "workout" department to request a short sale package. If you can get your lender to indicate how much of your mortgage they are willing to forgive up front, you boost your chances of working with a buyer to create a deal that is a bargain for them, but likely to be accepted by the bank, too.

2. Authorize your real estate agent -- in writing -- to work and to negotiate directly with the lender.
But make sure to stay on top of the communications between your agent and your lender. Delegate; don't abdicate!

3. Make sure an offer is presented in its best light.
Make sure your real estate agent includes a cover letter that explains the buyer's qualifications to buy your home, how much down payment money they propose to put in -- anything that might boost the lender's confidence. If the buyer is requesting any closing cost credits, be sure to tell the lender if the buyer is a first-time homebuyer; lenders are more likely to agree to concessions for first-time buyers than for investors.

4. Your lender will request a hardship letter from you.
Make sure you handwrite it, and present your finances in the worst light. If you lost a job, had an illness or death in the family, are a senior citizen or have any other circumstances then let the lender know! Let them know that you are considering filing bankruptcy, and that this short sale would prevent you from doing that; because bankruptcy stops the foreclosure process cold, the lender would much rather approve your short sale than have you file bankruptcy. Also explain any facts that might make it harder for the bank to resell your house -- anything that makes the bank grateful that someone has made an offer!

5. Make sure your short sale package is impeccably thorough.
At a minimum, the lender will want to see:

· The offer to purchase your home, including the buyer's preapproval letter;

· Your hardship letter;

· A balance sheet listing your monthly income and expenses;

· Statements from your checking, savings and other asset accounts;

· A net sheet from your real estate agent listing all of the closing costs that must be paid for your short sale to close;

· Supporting documentation, including two months' worth of paycheck stubs and all your bills;

· Your last two federal income tax returns.

Don't make them have to come back and ask you for any of these items. Make sure the package is complete the first time your real estate agent sends it!

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  "Mr. Klauber goes to Jefferson City"
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  Mortgage lenders can sidestep new rules to prevent lowball estimates Kenneth R. Harney
Saturday, January 16, 2010
Washington Post

The federal government's efforts to eliminate settlement-cost surprises for home mortgage applicants may have opened the door to a new, and potentially costly, set of consumer problems.

Starting this year, mortgage lenders nationwide must issue new good-faith estimates to applicants, covering loan fees and settlement charges. Under the regulations set by the Department of Housing and Urban Development, the estimates that lenders provide upfront must be accurate -- the same or nearly the same as the fees charged at closing.

The idea is to eliminate some of the most controversial practices in mortgage lending -- the intentional or inadvertent underestimation of fees. Under the old system, some lenders lowballed their estimates to lure applicants away from competitors. In the end, unwary consumers were hit with eleventh-hour surprises at closings -- fees sometimes thousands of dollars higher than the initial estimates.

In the past, no federal rule penalized lowballing. Loan officers and others who provided the estimates were not held responsible.

As of this year, all that was supposed to change. The reformed good-faith estimate, or GFE, requires lender-related fees to remain unchanged from application to closing and allows only up to a 10 percent difference for estimates in other areas such as title insurance and closing fees. Now when the charges at settlement exceed the estimates, the lender -- not the customer -- must eat the difference.

The GFE also is designed to facilitate rational comparison-shopping on fees and other loan terms. It contains boxes allowing consumers to compare up to four lenders' quotes and estimates, each essentially guaranteed to be accurate at closing.

Read more at www.washingtonpost.com

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  Changes In HUD-1 & GFE

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  Neighborhood Stabilization Program

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  Homebuyer Tax Credit Update

The Economic Stimulus Bill (The American Recovery and Reinvestment Act of 2009, H.R. 1.) was signed into law on February 17. Many elements of NAR's housing agenda were included, including an $8,000 first-time homebuyer tax credit. Originally available only through November 30, 2009, Congress has voted to extend and expand the homebuyer tax credit to continue to stimulate housing and improve our economy.

Under the bill:

• the current $8,000 tax credit for first-time homebuyers has been extended through April 30, 2010
• current homeowners are now eligible for a $6,500 tax credit through April 30, provided they've lived in their existing home as their principal residence for five consecutive years in the past eight years
• if potential homebuyers have a binding contract on or before April 30, 2010, they have until June 30, 2010 to close the transaction
• the annual income limits for full-credit eligibility are raised from $75,000 to $125,000 for singles and from $150,000 to $225,000 for married couples. Buyers with incomes $20,000 higher than these limits may qualify for a partial tax credit. These income limits apply for BOTH first-time buyers and current homeowners.

For more information about the extended and expanded tax credit, including a comparison chart and Frequently Asked Questions, go here for info posted on realtor.org.

The National Association of Home Builders has posted a list of FAQs here and this video which also addresses common questions:

Other key points of the legislation:

The $6,500 tax credit for eligible existing homebuyers went into effect immediately after the President signed the legislation earlier today. All closings taking place from November 7, 2009 until the deadlines above qualify for the tax credit.

Existing homeowners do not need to sell their current home to claim their credit, but they must occupy the new home as their principal residence. They can keep their current home as an investment property or second home.

To listen to a special podcast from NAR President Charles McMillan, go here.

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  Changes In HUD-1 & GFE

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  Happy New Year! “CTC would like to wish everyone a very safe and joyous Holiday season and a Happy New Year!”  4:08 PM 0 Comments

  New, Lower Refinance Policy Pricing

Attention Kansas City Lenders...

Call your Marketing Representative or Escrow Closer today to find out about our new, lower Refinance Policy pricing!!!

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  CTC Holiday Open House Pleas join us for our Holiday Open Houses! Click on the image above to see the dates and times for each location.

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