Short sale timelines and completions are improving, but servicing executives also know their industry can have better results in the government-backed Home Affordable Foreclosure Alternatives program, according to panelists at this week’s Best Practices in Loss Mitigation Conference in Dallas, sponsored by National Mortgage News.
One way to improve performance is to streamline the documentation process, said Bart Vincent, senior vice president of short sales at Wells Fargo Home Mortgage. But such a task can be difficult because investors have to understand the scope of individual situations in order to manage their potential losses, making proper documentation critical.
In addition, there are usually multiple players involved in a short sale decision, like mortgage insurance companies and any second lien holders.
David Sunlin, senior vice president and operations executive for short sales, deeds in lieu and real estate management at Bank of America, said it now takes 30 to 45 days to get a sale offer approved, which is a lot better that it used to be when approval times could top 90 days. But those approval times are far longer than on REO sale decisions, which can take only a couple of days.
“We need to make the short sales look like that,” he said, where after the servicer gets a proposed offer, the homeowner receives a prompt answer. With a system in place to pre-approve short sales, decisions could be made in as little as five days. “That's the nirvana we're trying to get to,” Sunlin said.
Leo Esposito, first vice president of loss mitigation and asset disposition at ServiceLink, said the servicing industry can improve short sale pull-through rates by transitioning from a reactive to proactive approach when borrowers have a clear intent to short sale.
If a homeowner is showing signs that they truly want to short sale and aren’t merely gaming the system to prolong the time before an inevitable foreclosure, servicers should respond with an escalated response to get a deal done.
For example, if a borrower approaches a servicer and already has the home listed for sale with a real estate agent, “that's a sign of intent that I'm looking to liquidate my home,” Esposito said.