Freddie Mac short sale policy changes to help service members

Under the new Freddie Mac short sale guidelines, service members can now qualify for a short sale even if the property is no longer  the service members' primary residence. Essentially, this provides a major opportunity for service members who moved and established a new primary residence as a result of PCS orders, but now decide to do a short sale on their former residence.

This change to Freddie policy gives service members who have already moved due to PCS orders and have established a new primary residence the same benefits of a short sale as if they had initiated the sale when they had first received their PCS orders. These benefits include exemption from making a cash contribution and exemption from the general requirement that the borrower's current monthly debt-to-income ratio must be greater than 55% if the borrower is current or less than 31 days behind on payments. To be eligible, the service member must have purchased the property on or before June 30, 2012.

These changes are summarized in the latest Freddie Mac Bulletin and will go into effect after August 1, 2014.

Justice Department lawsuits over mortgage-lending practices continue

The Justice Department's investigations into recent mortgage-lending practices of large banks are not showing any signs of slowing down. Citigroup is the latest one facing a lawsuit by the Justice Department for issues surrounding their mortgage-lending. 

Bank of America is currently facing similar lawsuits filed by both the Justice Department and the Securities Exchange Commission. In 2013, JPMorgan Chase & Co. agreed to pay a $13 billion settlement after an investigation similar to the ones forming the basis of the lawsuits against Citigroup and Bank of America.

The government said that Citi failed to tell investors that more than 70 percent of the mortgages backing the investment were written by mortgage brokers outside the banks' network, making them much more vulnerable to default. Only a selected group of investors were made aware of this practice leaving the rest without knowledge of this heightened risk. 

Please see the link below to the rest of the story at stltoday.com

http://www.stltoday.com/business/local/justice-department-preparing-to-sue-citigroup/article_75726e78-4e3a-5978-8065-b6e48231f9d9.html

Improving market among the many factors benefiting short sales

There is little doubt among experts that the housing market is showing resurgence in the first half of 2014. This is clearly great news for sellers with equity in their home, but also presents tremendous opportunities for sellers who are underwater. Increasing prices certainly lift many borrowers into an equity position, but it gives borrowers who remain underwater a better chance of receiving an offer that will be approved by the lender. Whether the lender is looking for a pay-off of 86%, 88%, or 99% of the fair market value, higher offers are more likely to be approved. It has been this way since short sales first began and will likely always be that way. Lenders want to mitigate their losses as much as possible and high offers allow them to do that.

In addition to the improving market conditions, there are a number of factors that are making short sales more streamlined, successful. and the preferred route for lenders and sellers underwater. 

First, lenders are catching up to the “New Normal” and many now have systems in place to efficiently review offers. In fact, this "New Normal" dictates that lenders first look at the short sale analysis on a delinquent account before they consider foreclosure . . . a paradigm shift in the way financial institutions handle delinquent accounts and distressed mortgages. This is a radical shift to the way lenders used to approach these accounts before the real estate meltdown in 2008. For example, many of the programs and processes now in place make short sales painless and more sophisticated.

Bank of America now has an “Agent Resource Center” that provides basic information on the short sale process. https://agentresources.bankofamerica.com/shortsale. Although it is not comprehensive of all the nuances of short sales, it presents outlines of and makes some of the required documents easily accessible.

Second, buyers and sellers now have more reasonable expectations on how the sale will proceed and how much time may be involved. Of course, these vary from one short sale to the next, but there are now standards in place. Realistic expectations keep all parties on the same page and cooperating toward a common goal. This simple intangible is remarkably important to success.

Third, short sales are no longer the “Wild Wild West.” There are now agents, lawyers, servicers, investors, and title companies with experience in short sales that can move the process along more efficiently. This bandwidth of knowledge shared by professionals across all these fields has benefitted everyone, especially sellers.

The improving market is great news for everyone, TRADITIONAL REAL ESTATE TRANSACTIONS… AND… SHORT SALES!