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Both Fannie Mae and Freddie Mac have instructed their selling agents to move forward with transactions involving foreclosed properties in cases where sales were suspended due to potential problems with the legal paperwork.

The GSEs were forced to temporarily halt the sale of certain properties two months ago when news surfaced that some of the nation’s largest servicers – includingBank of America, JPMorgan Chase, and GMAC Mortgage – had been employing robo-signers who failed to comply with clearly defined state laws when handling foreclosure documentation.

Fannie and Freddie also employed the services of the so-called foreclosure mill law firm of David J. Stern in Florida, which is currently under intense investigation for

forging foreclosure documentation. Both companiesterminated their business dealings with the Stern firm in early November.

The flawed casework from servicers and legal firms has raised questions about the validity of some foreclosure actions and the legitimacy of title ownership in the sale of repossessed homes.

Now that most of the servicers at the center of the paperwork mess have completed a large chunk of their case reviews and found no evidence of improper foreclosures, Fannie and Freddie are moving to proceed with foreclosures and REO sales as customary.

In a memo last week, Fannie Mae told its REO selling agents to “proceed with scheduling and holding the closings” and to direct matters to the appropriate staff “if a title issue arises with respect to the potential defect of an affidavit used in the underlying foreclosure.”

Freddie Mac said in its own memo that agents should “resume all normal sales activity.” The GSE reaffirmed that it will “resume marketing, sales, and disposing of assets previously placed ‘on hold.’”

As of September 30, Fannie Mae’s inventory of single-family REO properties stood at 166,787. Freddie Mac’sREO inventory totaled 74,897 homes at the end of September. Together, the two GSEs hold about a quarter of all bank-owned residential properties in the United States.

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The National Association of Realtors (NAR) is holding meetings with the nation’s four largest lenders to address growing concerns about their processes for short sales and selling REO homes

The trade group’s leadership team has already met with representatives from Bank of America and Wells Fargo to discuss, as NAR put it, “the problems Realtors face every day when working to get deals to the closing table.” Meetings are scheduled later this year with Chase Home Mortgage and CitiMortgage.

According to NAR’s report detailing the content of the meetings, both BofA and Wells “sought to assure NAR that they understand the problems our members are facing and are working hard to address them.”

NAR says BofA’s primary goal is to provide a favorable customer experience, solutions for distressed homeowners, and profitable growth.

Wells Fargo briefed NAR on its originations approach, including the responsible lending principles that were adopted at the beginning of the crisis and resulted in three years of essentially no growth at the company. However, the bank says those principles have laid the groundwork for more growth now and fewer distressed mortgages to resolve.

Full story here –

http://www.dsnews.com/articles/nar-meets-with-major-lenders-on-short-sales-and-reo-disposition-2010-10-12

Bank of America (BoA) reported $35.7 billion in nonperforming loans, leases and foreclosed properties in Q210 – which is 15% above levels measured in the same quarter of last year.  These loans and properties increased more than $5 billion in total aggregate balance since Q209. The total did drop by more than $200 million worth of these loans and properties from the $35.9 billion reported in Q110.  They represented 3.74% of all outstanding loans, leases and foreclosed properties at the end of Q210.  Since 2008, BofA and the acquired Countrywide completed nearly 650,000 loan modifications. During Q210 alone, BofA completed 80,000 modifications, including 38,000 trial modifications that were converted into permanent workouts under the Home Affordable Modification Program (HAMP).  If a modification does fail, BoA is putting an emphasis on selling the home through a short sale ahead of foreclosure. At REO Expo 2010, Matt Vernon, the short sale and REO executive at BoA said that the bank added 1,000 employees to the short sale staff and will “do everything possible to liquidate property prior to foreclosure.”

The national mortgage delinquency rate grew to 9.2% in May, up 2.3% from a month earlier and 7.9% from a year earlier, according to the latest report from mortgage performance data and analytics provider Lender Processing Services. A spike in the volume of mortgages becoming 30-days delinquent drove the overall uptick, according to the report, while new real estate owned (REO) assets slipped from recent all-time highs. LPS noted more than 7.3m mortgages in some stage of delinquency or REO.

“Earlier this week a top executive at Bank of America told an REO conference in Dallas that the lender would be focusing more on short sales than ever before. At first hearing this, I assumed it was because of the government’s Home Affordable Foreclosure Alternative Program, which provides cash incentives to servicers and borrowers for short sales and also streamlines the process, but of course there’s way more to it than that.  Said Bank of America exec, Matt Vernon, whose official title is National REO, Short Sale and Deed in Lieu Executive (his childhood dream title I’m sure), granted me an interview this morning, and was pretty clear as to why B of A is pushing these alternatives. The big difference, he says, is that BofA, as well as some other big banks, are changing the model from reactive to proactive. In other words, instead of waiting for a borrower or real estate agent to approach the bank with an offer for a short sale, they are using a “cooperative approach, wit

h homeowner, Realtor and servicer on behalf of investor, working to move that property through the process. All three of the interested parties holding everything together,” Vernon explains. ”

Olick continues: “So the servicer sets a minimum value for a short sale and then the borrower and Realtor go out and find a buyer. When they do, the process then moves far more quickly because it’s already approved. Of course there’s always the financial incentive as well. With so many borrowers either falling out of or not qualifying for the modifications, a huge flood of properties are moving to REO (bank owned). A report from Clayton Holdings finds short sales cut risk severity by 13 percent more than REO sales. And in some states where the foreclosure process is more lengthy, short sale loss severities can be as much as 26 percent lower than REO loss severities.  ”I would say that’s generally accurate in what we see,” agrees Vernon. “It really comes down to time. The quicker you can facilitate the property moving.” The good news is, that will cut down on foreclosures. The bad news is that short sales, like it or not, are comps. They sell for less, and consequently bring d
own the values of properties around them.”

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Over the past year, the mortgage risk analysis firm Clayton Holdings says it has witnessed an overall increase in short sale activity. Because of the growing emphasis on keeping borrowers out of foreclosure, servicers are becoming more inclined to employ alternative loss mitigation strategies. And Clayton says the added benefit to servicers is that loss severities for properties sold through short sale are 13 percent lower than loss severities for REO sales.  The analysts at Clayton Holdings examined performance indicators across nine servicers’ internal proprietary short sale programs, from October 2009 to March 2010.  In addition, the data showed that short sales cost bondholders about half the amount in fees and advances as REO sales, saving roughly $16,000 per sale.

Clayton says servicers with the lowest loss severities for short sales employ a variety of strategies including outsourcing, utilizing dedicated short sale teams, working directly with local broker networks, and setting list prices based on historical and geographical REO net proceeds.

With distressed borrowers increasingly turning to short sales as an alternative to foreclosure, the proportion of damaged foreclosure properties, otherwise known as REO, sold during April plunged, according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The survey found that short sales represented the largest portion of the distressed property housing market in April, accounting for 17.9 percent of all transactions. And as short sales surged, the portion of damaged REO transactions fell to 12.8 percent in April from 15.4 percent in March.  According to the survey, first-time buyers accounted for 43.4 percent of April’s home purchase transactions, a significant drop from March’s figure of 48.2 percent.
This early departure was unexpected, as these buyers had until the end of April to sign a home purchase contract to qualify for an $8,000 tax credit. But a National Association of Realtors practitioner survey showed a different story. According to this survey, first-time buyers purchased 49 percent of homes in April, up from 44 percent in March. The survey also found that investors accounted for 15 percent of transactions in April, down from 19 percent in March, and the remaining sales (36 percent) were to repeat buyers.