New Timelines, Added Transparency… But Where’s the Accountability?

On Tuesday, Freddie Mac issued a press release stating they were updating their timelines on processing short sales, in order to add transparency and expedite the process.

Today, we learned that Fannie Mae would be instituting the same changes. Primarily, they hope to have servicers provide more updates to borrowers on the status of the process, while having decisions on short sales made within 30 to 60 days of receiving an offer.

The full details (from Freddie Mac’s website), include:

 • Freddie Mac's new short sale timelines require servicers to make a decision within 30 days of receiving either 1) an offer on a property under Freddie Mac's traditional short sale program or 2) a completed Borrower Response Package (BRP) requesting consideration for a short sale under HAFA or Freddie Mac's traditional short sale program. (BRPs are standardized assistance applications developed as part of the Servicing Alignment Initiative.)

• If more than 30 days are needed, borrowers must receive weekly status updates and a decision no later than 60 days from the date the complete BRP is received. This will help servicers who may need more time to obtain a broker price opinion or a private mortgage insurer's approval on a BRP or property offer.

• In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower's response.

• Freddie Mac will use the new timelines to evaluate servicer compliance with the SAI and its own servicing requirements.

• Freddie Mac completed 45,623 short sales in 2011, a 140 percent increase since 2009. Overall, Freddie Mac has also helped more than 615,000 distressed borrowers avoid foreclosure since the housing crisis began.

My question to Fannie & Freddie is: or what? If servicers don’t comply with this list of changes, what’s going to happen to them? Will you begin paying a portion of the servicing fee to them on the back end and, if your standards aren’t met, withhold a portion of that payment? If a servicer doesn’t meet the above standards on a set percentage of files, will they lose the right to service these files?

One of the biggest problems with the whole loss mitigation process has been accountability. From government mandates to bank executive directives, it’s hard to enforce policy when no one will be punished for ignoring it. Simply put, consequences for non-compliance must be put in place.

Don’t get me wrong – if a sincere attempt to improve the process is being made, then I applaud it. However, my BS detector tells me this is another attempt to win public favor and I’m going to need to see servicers actually begin complying, before I buy in…

Fannie & Freddie – Redemption Period Clarification…

Recently we had been advised that Fannie Mae and Freddie Mac would no longer be considering short sales on properties that were still within the redemption period.

A number of emails were forwarded to me, all with the same basic message: "Freddie Mac is no longer reviewing offers on redemption properties. I would advise you or the seller or both of you to call Freddie Mac to voice your concerns over this issue".

Since then, the Michigan Association of Realtors (MAR) sent out the following email:

"UPDATE: Freddie Mac Short Sale Cancellations

Recently, the Michigan Association of REALTORS® participated in a conference call with representatives from the National Association of REALTORS®, Freddie Mac, and other interested parties regarding Freddie Mac’s new policy affecting short sales during the redemption period.

In short, this situation was all an unintended consequence of a policy change under the Freddie bulletin issued on March 13th and scheduled to take effect on June 1st. If a rollback takes place (taken out of foreclosure) for any number of reasons, including lender mistake, the rollback "compensatory fee" of $1,000 could be charged to the servicer where the lender foreclosed without using other means of resolving the situation. Some servicers interpreted that fee to include a short sale where the borrower was foreclosed upon and then redeemed through a short sale.

Freddie is now reviewing these situations on a case by case basis and working to resolve the current situations, and then deal with the redemption issue as a whole. To deal with immediate concerns, there are account teams going back to the servicers who have changed their policies since the bulletin was issued on March 13th. Freddie has reached out and is trying to go back individually-as soon as possible. In the meantime, it is recommended that REALTORS® should get back in contact with the lenders that cancelled the short sales, citing Freddie's policy change and tell any lenders that they are still being considered on a case by case basis. Where MAR members meet resistance from the lender to reinstate, we have been asked to take each case to Freddie on their (800)-FREDDIE number and press option "2" and mention "short-sales during the redemption period" and the name Dan Smith."

Hopefully, this issue has been resolved going forward. On average, it still takes far too long for lenders and services to process short sales. If we lose the valuable time offered by working through the redemption period, it will become very difficult for short sales to be approved in the required timeframe – especially, if the lender requires the borrower to be delinquent first!

I’m happy to see MAR and the National Association of Realtors (NAR) taking the fight to Fannie & Freddie on this, keep it up!