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In the third quarter of this year, servicers increased the pace at which they completed proprietary modifications and short sales, HOPE NOW data revealed Monday.
In Q3 2012, proprietary modifications, or non-government mods, stood at 186,057 compared to 161,764 in Q3 2011, representing a 15 percent annual gain, according to the alliance.
Quarter-over-quarter, proprietary mods were up 41 percent compared to Q2 2012, when there were 131,556 completed mods.
In addition to the 186,057 proprietary mods in Q3, mortgage servicers also completed 33,276 mods through the Home Affordable Modification Program (HAMP), bringing the quarterly total for completed mods to 219,333. HOPE NOW noted HAMP figures for September have not yet been reported.
When including all modifications, year-to-date, 604,301 homeowners have received permanent loan mods in 2012.
In Q3, short sales, another solution to prevent foreclosures, totaled 110,153, up 16 percent from Q3 in 2011 when there were 94,560 completed short sales.
Quarter-over-quarter, short sales were up 3 percent. However, completed short sales were actually down month-over-month by 13 percent in September.
While mods and short sales were up in Q3 2012, foreclosure starts were down, falling to 503,995 compared to 597,447 in Q3 2011, representing a 16 percent decline.
Foreclosure sales saw a slight 1 percent decline in Q3, dropping to 197,937 compared to 199,383 a year ago. In a statement, Faith Schwartz, executive director of HOPE NOW said, “The combination of loan modifications and short sales solutions completed by mortgage servicers, in the third quarter of the year, totals over 329,000. That compares to approximately 198,000 foreclosure sales during the same time period.”
Sixty-plus delinquencies also fell in Q3 2012, numbering 2.45 million, down 12 percent from the same quarter last year. For just the month of September, HOPE NOW also provided data on characteristics of proprietary loan modifications. Among the 60,595 completed proprietary loan mods in September, 87 percent included reduced principal and interest on monthly payments. In addition, 76 percent of those mods had reduced principal and interest payments exceeding 10 percent.
Since 2007, the servicers have completed 5.82 million permanent loan modifications. Of those loan mods, 4,739,109 were proprietary and 1,076,747 were completed under HAMP.
HOPE NOW—an alliance of mortgage servicers, investors, mortgage insurers, and non-profit counselors—offers a free hotline for struggling homeowners at 888.995.HOPE.
Pursuing a short sale is often thought of as a painstaking process, and it’s not uncommon to hear of complaints about slow responses from servicers and last minute rejections on offers. Fortunately, not all lenders/servicers are the same when it comes to dealing with short sales, and RealtyTrac compiled a list of data revealing which institutions tend to move through the process quicker and for less.
Fannie Mae, Freddie Mac, and FHA had the shortest timelines at 193 days in January 2012, a decrease compared to a year ago in January 2011, when short sales averaged 248 days. Ally Financial came in second at 321 days, reducing its timeline as well from 393 days a year ago.
PNC Financial Group was third, taking 353 days, though the bank takes longer than it did a year ago when the it took 206 days. Wells Fargo came in fourth (385 days). Bank of New York Mellon took the fifth longest (402 days), followed by Bank of America (403 days) and Sun Trust (404 days). The short sale timeline includes the time a property starts the foreclosure process to the time it’s sold as a pre-foreclosure property.
Recently, Fannie Mae and Freddie Mac announced new guidelines to take effect in June requiring servicers to respond within 30 days after receiving a short sale offer or a borrower application. Bank of America recently announced that its providing a decision on a short sale offer in 20 days.
In terms of pricing, Fannie Mae, Freddie Mac, and FHA sold homes for the least amount in January 2012, averaging $128,642, a drop from year ago prices in January 2011 when they averaged $160,982. Deutsche Bank’s average price was $132,996, followed by Sun Trust Banks ($144,024), and CitiGroup ($148,411), and PNC Financial Group Inc ($149,332). Bank of America Wells Fargo were the bottom two on the top 10 list, averaging $158,632 and $167,371, respectively, for January 2012.
As for the number of short sales, Bank of America completed the most in January 2012, with 5,276, followed by Chase (2,967), Wells Fargo (2,788), MERS (1,429), and Bank of New York Mellon (1,401).
Short Sales Bring 24% Greater Returns than Foreclosures
The real estate professionals at Massachusetts-based McGeough Lamacchia Realty have been proponents of short sales for quite some time, insisting that everyone comes out ahead when a short sale is achieved as opposed to a foreclosure. Now they’re sharing the facts that back up their claim.
On average a home sold through short sale brings a 24 percent greater return than a foreclosed property, according to recent findings from McGeough Lamacchia Realty.
“This means the banks are losing an average of $43,000 for every foreclosure sale compared to what they would have made in a short sale,” said a blog post on the company’s website.
The firm reviewed prices for short sale and foreclosure sale properties in 2010 and 2011 in Boston, Phoenix, Tuscon, Southern California, and Southwest Florida.
While banks often offer incentives to homeowners who pursue a short sale, “more needs to be done to promote short sales,” McGeough Lamacchia said. Specifically, the firm points out that Fannie Mae and Freddie Mac are not offering the cash incentives for short sales that are now standard through the Home Affordable Foreclosure Alternatives program.
“Fannie Mae and Freddie Mac need to do more to promote short sales and make it easier for distressed homeowners to do a short sale and avoid foreclosure,” McGeough Lamacchia said in their blog post.
Bank of America Launches 'Test-and-Learn' Short Sale Program in Florida
Bank of America has begun a pilot program in Florida offering extra incentive payouts to distressed homeowners who agree to and successfully close on a short sale.
Incentive payments for relocation assistance range between $5,000 and $20,000. The program is being offered on a limited basis for investor-approved, pre-offer short sales.
Bank of America is calling it a pilot “test-and-learn” program.
spokesperson for the bank explained that Florida is experiencing higher foreclosure rates than other parts of the country, and is therefore seen as a “viable market to gauge incremental short sale response and completion rates when presenting homeowners with relocation assistance at closing.” If successful in Florida, Bank of America says the “test-and-learn” could be expanded to other states. The short sale must be initiated between September 26 and November 30, 2011 and close by August 31, 2012.
Florida homeowners who qualify for the “test-and-learn” program will receive a solicitation mailer directly from Bank of America, or may learn about the program if they are working with a real estate agent who handles pre-approved short sales for BofA. The bank has a dedicated team of short sale specialists standing by to help agents determine if their homeowner client qualifies for the short sale relocation assistance at: 877.459.2852 .
Bank of America has already been offering short sale payouts in the state of Florida, albeit for smaller amounts.
Susie Kirkland with RE/MAX Southern Realty in Destin says she’s closed five transactions within the past couple of months through what BofA calls its Cooperative Short Sale Program. The bank awarded Kirkland’s short sellers $2,500 upon closing. BofA is even extending short sale incentives to some investors. Steve Kravitz of Bankers Realty Services, Inc. in Fort Lauderdale just completed a short sale transaction last week on an investment property. BofA offered the non-occupant owner/seller $3,600. Kravitz says his client had been late on a few payments, but there was no foreclosure filing on the property. BofA and other lenders are looking to short sales earlier on in the process, and getting ahead of the foreclosure crisis in areas where the system is already bogged down with distressed properties.
“We’ve had cases here where we’ve gotten short sales through where there haven’t even been any late payments at all,” Kravitz said. Kravitz says short sales just make sense for a market as hard-hit as Florida. Not only can a short sale be more cost efficient when lenders are facing a foreclosure timeline of nearly two years, but it “gets more product and better product out to buyers.”
He explained that oftentimes, a foreclosure property can sit vacant for more than a year, whereas with a short sale, the home is typically occupied up until a week or a few days prior to changing hands, which translates to a better quality home in better shape.
Kravitz says banks are becoming “more cooperative” and approving short sales more quickly. The investment property short sale Kravitz closed last week took just 45 days.
Other lenders are also extending incentive payouts to short sellers in Florida and some other hard-hit states such as California.
In July, DSNews.com reported that Wells Fargo, JPMorgan Chase, and Citi were all offering extra relocation assistance to borrowers opting for a short sale in certain markets.
Robert Valenzuela with Century 21 Schwartz Realty in Key Largo, Florida, says he’s completed six short sale transactions in which the seller was given money to help with relocation, the largest of which was a $45,000 payment from Chase Bank.
Banks dealing with lengthy, complicated and frequently messy foreclosures are starting to see "short sales" as a quicker and cheaper way of getting bad loans off their books. The nation's biggest mortgage servicers- Bank of America, JPMorgan Chase and Wells Fargo - are beginning to step up their efforts to ease the short sale process for borrowers who are unsuccessful in getting loan modifications and face the threat of foreclosure. Servicers are attempting to reach out to borrowers and are paying out more incentives to those suffering financial hardship to help proceed with a short sale. They are also cutting down the time taken to approve short sales, although realtors still complain that the process takes too long.
JPMorgan has processed 120,000 short sales through its proprietary program since June 2009 and now averages 5,000 short sales a month. The bank says its average response time to approve a short sales transaction is 30 days. "We think the short sale is a good solution for many struggling homeowners and we let them know that it's an option," said Christine Holevas, spokesperson for JPMorgan in an email. "Our outreach efforts have increased in the past year or so. Foreclosure can be an expensive and lengthy process for all parties. It's a good deal for the homeowner and a good deal for us (a cheaper way to get a bad loan off the books.)"
The average time for the foreclosure process- from the time of notice to the completed foreclosure- is now 318 days in the U.S., according to RealtyTrac. The foreclosure process in the state of New York, which follows a judicial process, took 966 days on average for properties foreclosed in the second quarter. New Jersey and Florida followed with an average processing time of 944 days and 676 days respectively. The longer it takes for a foreclosure to be approved, the longer bad loans stay on banks' books. Foreclosures are also more expensive than short sales, because of the legal expenses involved as well as the expenses for maintenance and upkeep while the property is in foreclosure.
Wells Fargo, for instance, incurred expenses on repossessed homes to the tune of $305 million in the second quarter and $408 million in the first quarter, according to data from SNL. Data for the other big banks wasn't available. According to real estate analytics firm CoreLogic, the number of short sales in the market have tripled in the last two years and transactions are anticipated to grow by 25% in 2011. The markets with the largest short sale volume are California, Arizona, Colorado and Florida.