4:05pm | Lenders might be the biggest hurdle faced by those working to ease foreclosures, according to a California survey released on Tuesday.
Fewer than three out of five short sales close in California, according to the Short Sale Lender Satisfaction Survey released by the California Association of Realtors.
The survey gauges Realtors’ experience with short sale transactions. Short sales are transactions involving a lender or lenders agreeing to accept less than the mortgage amount owed by the homeowner. Short sales are generally agreed upon as a good alternative to foreclosures.
“It’s disappointing that less than three in five short sales close, despite every effort by the Realtors, home seller and potential home buyer,” C.A.R. President Beth L. Peerce said in a statement. “Many underwater homeowners who have been hit by the recent economic crisis can no longer afford to stay in their home and just need to sell their home as expeditiously as possible are unable to largely because of the complex and cumbersome short sale process.”
Of the Realtors surveyed, 94 percent participated in a short sale transaction during 2010.
“Every Realtor has their own horror short sale story to tell—I certainly have mine,” said Helen Najar, a Realtor with ReMax College Park in Long Beach. “The process is broken. Often the bank is non-responsive for too many weeks, despite assurances by the banking industry and the Administration. This puts an onerous burden on the buyers. Every Realtor can give examples of totally unrealistic demands, uninformed bank asset managers who we now find are often outsourced overseas.”
Najar added: “I’ve pulled back from short sales for my buyer clients unless the bank has identified an acceptable price.”
The most frequent problems cited in working with lenders and servicers during the short sale process include unresponsiveness, onerous procedures, and long processing delays, according to the survey.
Seven out of 10 Realtors said closing their most recent short sale transaction with a lender or servicer was “difficult” or “extremely difficult.” Roughly one in 10 said it was “easy” or “extremely easy,” the survey shows.
“I don’t know that a truer statement could be made,” Jeremy Colonna, a broker with Colonna & Co. Realty in Belmont Shore, said. “The fact is that most of the lenders with whom we work on our short sales have requirements well above and beyond those of even the strictest of lenders originating new loans. Just yesterday, I had to type up a new purchase agreement for a triplex to include each individual apartment address on the offer along with the addition of the ZIP code on the first page, despite the inclusion of the Assessor’s Parcel Number identifying the property. There are a whole litany of different guidelines and requirements that each individual lender calls their own.
“Virtually all short sale lenders refuse to accept electronic signatures, despite the fact that they are legal for real estate transactions in the State of California. Most require information to be faxed rather than emailed, and the granddaddy of all requirements exists over at one major lender. If the buyer backs out, the whole process must start all over, despite having an approved value.”
Colonna, who handles a large number of foreclosure sales in and around Long Beach, summed up his feelings on how things can be fixed: “Frankly, the efforts of most lenders to try and implement a short sale program have been incredibly clumsy. The systems either need to be streamlined or abandoned. We need our real estate market back.”
More than 60 percent of Realtors in the survey said that lenders took more than 60 days to return a written response of the approval or disapproval of the short sale agreement submitted, and 4 percent said they received a written response in less than two weeks.
“The survey results show that the short sale system is clearly flawed and must be standardized and streamlined to reduce the inventory of foreclosures,” Peerce said. “Increasing the number of successful short sale transactions is one important way we can help California families avoid foreclosure and move our economy closer to recovery.”
Nearly three-fourths of Realtors were “not satisfied” or “not at all satisfied” with the amount of time it took to hear whether a transaction was approved or disapproved, while 16 percent said they were “satisfied” or “extremely satisfied.”
“The lack of standardization, long approval process, and lack of lender approvals are hampering what should be a 45-day short sale process,” said Peerce. “Instead we’re hearing the typical response time for lenders is at least 60 days, and in many instances, their response time exceeds six months.”
C.A.R.’s survey was conducted during the last two weeks of December 2010. The survey was delivered to 20,000 Realtors, with 2,150 responding.