Over the past month our short sale team at MagnumOne Realty has noticed a change in how lenders are approaching short sales and foreclosures.  We have all heard co-workers and friends telling us about how they or someone they know has managed to live in their home for 9 months or even a year without making a payment before they completed a short sale or the bank foreclosed.  Those days now seem to be in the past.

Lenders appear to have finally figured out their back door was wide open and profits were flowing out at a very rapid rate.  Let’s face it, look at the bank stocks, as a general view bank management is not very good.  Is that an understatement?  Many of the big lenders such as Countrywide (now owned by BofA), Bank of America, Wells Fargo and others now appear to have processes in place and have staffed their “loss mitigation” departments to handle the volume.  That only took two years!

Lenders are moving faster to file notice of defaults and set foreclosure dates.  They are not letting borrowers miss six payments before starting the collection process.  On the short sale front they are responding faster to requests and many seem to have actually empowered negotiators to make deals work.  Now we can get a short sale approval from Wells Fargo in six weeks vs. the six months it took last year.

The problem we are seeing with what you would expect to be positive changes is many financially distressed homeowners have heard or believe they can live in their homes for months and months without making payments.  They are counting on using the money they are saving to pay off credit card debt and build a nest egg that will allow them to find a place to rent and move.  Yes, there are those that use the money to buy more toys! 

We have been getting more requests from homeowners to help them avoid foreclosure with a short sale and finding that the notice of default has already been filed and foreclosure sale dates set.  This makes doing a short sale much more difficult if not impossible.  Some lenders will not even review a short sale request when a foreclosure date is set. 

My message today is, if you or someone you know is not making their mortgage payment and are expecting to avoid a foreclosure by doing a short sale, do NOT wait too long to get started.  Even if you are talking with your lender about a loan modification the clock is ticking.  It is okay to be working on a modification of your loan and marketing your home at the same time.

These are tumultuous times and there is a great deal of conflicting information floating around about short sales and how they may or may not relate to a particular set of circumstances.  If you have questions or would just like to talk send me an email or call me at 916 290-9339.  We hate to see families losing their homes but we do get some satisfaction from helping them avoid a foreclosure.