We were invited to attend the WinDS REO Conference in Las Vegas last month where I was one of the speakers.
One of the benefits we had was being updated by asset managers, HUD and banks. I have a list of the posts we wrote about REOs and the conference at the bottom of this post.
The Freddie Mac Road show was at the conference. Jason Root who is the director of the short sales for Freddie spoke to us about important updates and some facts about Freddie that are not really reported about.
Freddie Mac’s first goal is home ownership. They want people to stay in their homes if they can. Freddie Mac agrees that home ownership is good for the economy and good for families.
We always say there are two sides to every story and also there is more to it than just approving a short sale.
After Freddie Mac gets a short sale package they will have an answer back to the servicer in 5 days or less.
This is of course, assuming that the short sale package is complete and has been thoroughly reviewed by the servicer and the MI company if there is one.
If the servicer is telling you that it takes 3 weeks to hear back from the investor and that investor is Freddie Mac, they are lying about it. Now, if it still has to go to the MI company then yes, it could take 2 to 3 weeks to hear back from the MI company. Freddie Mac’s turn around time is 5 days or less.
Freddie Mac wants to get short sales approved and does not want to foreclose if they can do a short sale. They understand that a short sale is better for the agents, the homeowners, the buyers, the neighborhood and the community than an REO property.
Now, if you are an agent and you submit a short sale package to the servicer don’t go calling up Freddie a day later asking if they have a package because that is NOT how the system works. Agents who do this are clogging up the system. Jason was telling us about an incident where he received a phone call from an irate agent who wanted to know if the short sale package she had sent in had been approved yet by Freddie Mac. She said that she had been calling they bank over and over again and they never returned her call back. When he asked her when did she submit this short sale package she said, ” I sent it to the bank this morning at 9 a.m. It is 4 p.m. now and I still have not heard anything from the bank telling me whether the short sale was approved or not.” Seriously!! Get some education on short sale processes if you are in this category.
The other calls that Freddie gets a lot of are agents who call up demanding to know what is going on with a short sale package only to find out from Freddie that the short sale is not a Freddie owned note at all but rather is owned by Fannie Mae. They are two separate entities. Make sure you know who the note owner is before you start calling. I guess this does not surprise me any more when we still get agents to this day who don’t know the difference between a short sale and a bank owned property.
Some servicers do have full delegation authority for Freddie mac files. Not all of them do.
To be approved for HAFA for a Freddie file- the borrower has to be 60 days delinquent on their mortgage.
However, to do a regular short sale the borrower does NOT have to be late on their payments. Write that down! The Borrower does NOT have to be late to do a short sale.
Freddie Mac does NOT waive rights to deficiencies however they DO NOT pursue judgments unless they discover FRAUD was involved in the transaction. That is right from the director of short sales, Jason Root.
If you go buy another house right after you do a short sale, Freddie is not going to come after you, according to Freddie Mac.
Freddie Mac will NOT interfere with your listing agreement.They will NOT reduce your commission. The maximum commission they allow is 6% and unfortunately this is also the case on very small sales.
Freddie Mac also does not refer borrowers to specific agents or agents with specific designations. We really like that. Freddie Mac says that the investor or the servicer DO NOT own the property and therefore the choice to do a short sale and the choice of agents is totally up to the borrower and they have no plans in interfering with that choice.
They understand that they are NOT a party to the contract.
Nestor and I brought up the fact that the servicers are the ones holding up the process and not doing things correctly.We also understand that there is a contractual fiduciary relationship between the servicer and the note owners/ investors. They have a signed contract so it is not as easy as just being able to fire a servicer for doing a poor job.
So Freddie Mac Road Show goes around the country to the servicers places of business and is training their negotiators how to do short sales. The servicers had to hire a lot more people but those people need to be trained. So Jason and about 9 or so other employees are taking a proactive approach and doing the training themselves.
Freddie Mac will pay out a maximum of 6% up to 10% of the second note to the second note holder. This is their policy for right now and there is no plan on changing that any time soon. They understand that this can create problems for the short sale closing however this is a moral hazard approach that they have chosen. The second is going to get nothing at a foreclosure sale.
This does not mean that you should call Freddie for every short sale where they own the note. Go through the servicer. Go to the negotiators’ superiors, take it to the executive office and then as a last resort you can call Freddie at 1-800-FREDDIE.
Some servicers also are now being given full delegation authority to postpone foreclosures in behalf of Freddie Mac without having to go to Freddie for those requests and rulings.
Freddie Mac says they want to do short sales because:
Jason said on behalf of Freddie that they appreciate the real estate broker and agent community, they look to the agents to solve problems and take short sale listings. Jason is a sincere person and we appreciate his time very much in giving us these Freddie Mac updates for short sales.
FHA is extending the unemployment benefit of allowing homeowners with FHA loans to go from missing from four months to twelve months to keep qualifying homeowners from losing their homes to foreclosure.
Homeowners who have defaulted on their mortgage loans are getting loans again. The chief economist of the American Bankers Association says that banks are extending credit to those with serious blemishes on their credit. They are saying that borrowers who are current and pay all of their bills on time, their car payments on time and any other loans on time but that have defaulted on their mortgages are some of the “most attractive” candidates for the new loans.
From February 2009 to about August 2011 over 64,000 people who defaulted on their mortgages received consumer loans. This is according to TransUnion. Most of these consumers got credit cards but a lot of them got car loans. In fact, about 40% of the defaulted homeowners were given car loans, personal loans and line of credits.
The lenders believe that those who have defaulted on their mortgages and yet are current on their other obligations are a good credit risk because the housing bust put these borrowers into a situation they did not want to be in but were forced into by the market. The lenders take in many factors when deciding to give a loan so each situation is different.
But past homeowners seeking to get credit need to understand that they will be charged with higher rates and that getting credit is not always a good thing. It can become another trap. The average credit card interest rate is about 15% but for those who have defaulted on their mortgages the interest rate they are paying is 20% to 25% ! Wow, now that is high interest. Takes me back to the early 80’s! Getting a car loan if you have excellent credit can be as low as 4% but if you have a mortgage default that same car loan to you is going to be as high as 19%! Maybe consumers in that position should save their money and buy a car with cash.
Title Insurer Liquidation Bill HB 1007 passed the Florida Senate joined with the Florida House Of Representatives jointly. It was unanimous.