Paddy Deighan is a real estate investor, attorney and advocate. This blog is dedicated to providing useful information, tips and guidelines for all of your real estate needs.
Wednesday, June 27, 2012
Fast Short Sale Approval?? Ask if the Servicer is Delegated
Fast Short Sale Approval?? Ask if the Servicer is Delegated. When home owners pay their mortgage payments to Bank of America, Wells Fargo, or any of the other "lenders" these entities are actually servicers for the investor that owns the note. In most cases, even though they lent the money they have subsequently sold the loan to an Investor. At this point, all they do is collect the payment, take a fee for this and then transfer the remaining funds to the holder of the loan...the Investor. The investor could be Fannie Mae, Freddie Mac, Pension funds, Insurance companies etc...
When you are requesting a Short Sale the request is almost always made to the Servicer. If the Servicer is delegated then they have the authority to accept the Short sale without asking the investor for approval. Usually this delegation is based on certain parameters.
For example: The Investor may tell their Servicer that they can accept any short sale as long as the loss is less than 35%; the Borrower (Seller) is at least 30 days delinquent on their payments, live in the property and the current payment is more than 31% of their gross income.
If the Short Sale fits within these parameters then the Servicer can issue the approval. The parameters vary from investor to investor.
Here's why it is important to know whether the Servicer is delegated. If the Servicer is able to approve the Short Sale without going to the investor, it saves a lot of time. It can easily cut the Short Sale time for approval in half.
An example of why this knowledge is relevant: Recently it was discovered that a Servicer was delegated. There was a purchase price that netted the investor about $1,000 less than what would fit within this particular Servicer's delegation authority. At this point, there are two options: 1. the file could be submitted to the investor for approval, or 2. the purchase price could be raised $1,000 to get the approval quickly. The Buyer was perfectly happy to pay an additional $1000 (presumably in exchange for a faster approval). The Short Sale approval was received the next day.
Accordingly, always ask the Servicer if they are delegated for the file you are working. If they are try to see if the Short Sale you have submitted fits their parameters. They may not always tell you but it certainly is worth asking. Knowing the answer can save you a lot of time.
Paddy Deighan J.D. Ph.D