Tuesday, August 28, 2012

Arm’s length transactions and short sales

Arm’s length transactions and short sales

by in Coaching -  

short sale Arm’s length transactions and short sales

What is an arm’s length transaction?

According to the National Association of Realtors®, an arm’s length transaction is a real estate transaction “in which the buyers and sellers act independently and have no relationship to each other. The concept of an arm’s length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party.”
When it comes to short sales, agents, buyers, and sellers frequently have questions about the structure of the short sale transaction. An agent may want to know whether she (or he) can represent a child, sibling or other relative in the short sale of a home. Other buyers and sellers may want to purchase the home of a friend of relative when the property is listed as a short sale.

Almost every short sale lender or servicer (including Fannie Mae and Freddie Mac) has a zero tolerance policy when it comes to non-arm’s length transactions. In fact, many of these lenders require all parties (including both the listing and selling agents) to sign an Affidavit of Arm’s Length prior to approving (or even processing) the short sale transaction.

Bad Things Can Happen

I received a phone call the other day from a Broker who had a fully approved short sale at one of the major lending institutions. He needed a few extra days to close the transaction. And, when he called the bank to ask for the extension, he learned his short sale had been declined. Why? Well it turns out that the Broker was the buyer and he was being represented by an agent in his office. The servicing company and the investor were having nothing of it, and denied the short sale outright.
This individual had signed an arm’s length affidavit. However, whether he actually read before he signed is something that I am still curious about.

Moral of the story: carefully consider the relationships between and among all of the parties of the short sale transaction before moving forward. And, of course, read everything carefully before signing on the dotted line.

Friday, August 24, 2012

Wells Fargo and Non-profit will provide homes to Military families.

Wells Fargo, Nonprofit Partner to Provide Homes to Military Families

National nonprofit Operation Homefront announced Thursday that Wells Fargo will donate up to half a million dollars in bank-owned properties to help house military families.

The bank will provide the homes and other support as part of Operation Homefront’s “Homes on the Homefront” program. The two organizations will match unsold homes in the bank’s inventory with deserving families served by the nonprofit. Homefront will provide ongoing transitional services to the recipients until the properties are actually deeded to families.

“Operation Homefront is thrilled to welcome Wells Fargo as a partner for our Homes on the Homefront program,” said Jim Knotts, Operation Homefront CEO. “Wells Fargo’s assistance with the program ensures that more veterans and their families will be able to grow and move forward following their transition from the military.”

The program’s first priority is to take families who currently live at Operation Homefront Village-a transitional housing facility for Wounded Warrior families-and place them in homes.
In order to be eligible for the program, applicants: Must be on active duty, Guard or Reserve, or have been honorably discharged; must not currently be a homeowner; and must be financially capable of sustaining the home throughout an initial transition period and beyond. Any veteran of any era may apply, regardless of wounded or disability status.

“Wells Fargo is proud to support Operation Homefront’s efforts to make housing available for veterans,” said Tyler Smith, a VP with Wells Fargo Home Mortgage’s Premiere Asset Services. “We hope more companies and individuals will get involved with supporting Operation Homefront’s mission that brings resources to veterans seeking ways to overcome homelessness and to address economic challenges, including with the housing market.”
©2012 DS News. All Rights Reserved.

New Short sale Guidelines

Short Sale Guidelines Could Cause Short-Term Losses to Lenders: Fitch

Earlier this week, FHFA, Fannie Mae, and Freddie Mac revealed new short sale guidelines to take effect November 1 of this year.

The new guidelines are expected to make short sales easier to process and will open up the foreclosure alternative to borrowers not in default if they have certain hardships.

While Fitch Ratings views these new rules as a plus for the housing market in the long term, the ratings agency said, “in the short term, the new guidelines could increase losses on some existing bank home equity or second lien portfolios.”

The ratings agency made it clear that it believes foreclosure alternatives are good for the market. For lenders, the positives come in the form of not having to deal with the lengthy and costly problems foreclosures bring.  “For example, short sales on non-agency RMBS are currently finishing 20 months after the last payment made on the loan. That is approximately 10 months shorter than the average time to foreclose. Similarly, the loss severity on prime non-agency mortgages is 14% lower on short sales than REO sales,” Fitch stated.
Another important provision from the new guidelines is one which addresses issues with subordinate lien holders. In order to prevent second lien holders from stalling approval, the GSEs will offer lenders up to $6,000.

Fitch noted that over the short term, the impact of this new guideline on lenders will “vary greatly, as the carrying, legal, servicing, and opportunity costs range broadly across many loans.”
The ratings agency also added that “many of the 2005-2008 vintage home equity lines of credit are still in their interest-only stages and likely to begin amortization in 2014-2015, which may further pressure home equity performance over the intermediate term.”
©2012 DS News. All Rights Reserved.

Short sale Flowchart

Short Sale vs Foreclosure – 10 Common Myths Busted

Short Sale vs Foreclosure – 10 Common Myths Busted

Short Sales vs Foreclosures: The Banks’ Preference

Short Sales vs Foreclosures: The Banks’ Preference