California’s real estate agents say lenders are making some progress in processing short sales, but short sale problems persist for homeowners selling short to avoid foreclosure.
The California Association of Realtors (CAR) latest survey found 64 percent of estate agents surveyed expressing “difficulty” in closing short sales, down from 77 percent a year ago and 70 percent in 2010 when the survey began.
There was an even greater improvement in the number of real estate agents who experienced an “extremely difficult” time closing short sales – 34 percent in 2012, down from 56 percent in 2012.
The CAR survey gauged 612 California real estate agents’ experience working with lenders in their most recent short sale transaction.
A short sale, often an alternative to foreclosure, occurs when the lender accepts a sale for less than the balance owed on the mortgage, provided an acceptable buyer purchases the home.
“While it’s encouraging that lenders and servicers are making headway in improving their short sale processes, they still have more work to do to ensure that not only Realtors, but also home sellers and buyers have a better experience when dealing with short sales,” said CAR President LeFrancis Arnold.
“A recent change announced by the Federal Housing Finance Agency (FHFA) to align Fannie Mae and Freddie Mac short sale guidelines will allow lenders and servicers to quickly and more easily qualify borrowers for a short sale, further improving the process,” Arnold added.
Lender missteps plague housing market
Despite that change, the National Mortgage Settlement, the Independent Foreclosure Review and regulatory overhaul from a variety of quarters, mortgage lenders continue to face a host of actions for alleged shortcomings, including discrimination and regulatory violations.
Along with alleged legal infractions, California real estate agents say lenders don’t communicate well.
Communication issues included lenders’ slow response time to a short sale package (cited by 67 percent of agents in 2012, up slightly from 66 percent in 2011), poor communication with lender representatives (cited by 55 percent of agents in 2012, unchanged from 2011) and repeated requests for documentation (cited by 50 percent of agents, down from 51 percent in 2011).
Eight percent of real estate agents reported that the lenders continue to practice a form of “dual-tracking” – foreclosing on a home before an active short sale transaction could be completed, down from 15 percent in 2011.
Both federal law and the California Homeowner Bill of Rights have outlawed dual tracking that includes simultaneous mortgage modification and foreclosure actions.
Overall, satisfaction in working with lenders in short sales improved over the past year, with 59 percent expressing dissatisfaction, down from 75 percent in 2011.More than six in ten real estate agents said they would not refer buyers to the lender for future home purchases, down from 78 percent in 2011.
“With short sales being a better option than foreclosure for both struggling homeowners and lenders, it’s important that lenders continue to improve their processes so that losses incurred by homeowners, lenders, and taxpayers are limited,” Arnold said.
CAR survey charts
- Difficulty in closing short sales
- Communication issues
- Overall lender satisfaction
- Lender Performance Index