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Erika Kauzlarich-Bird: Survey: Lenders making progress on short sales

Posted: November 8, 2012 2:00 a.m.
Updated: November 8, 2012 2:00 a.m.
 

Lenders here in the Santa Clarita Valley, and throughout California, have made progress when it comes to processing short sales, yet the gains have been incremental with plenty of pitfalls and delays that still doom too many transactions.

That was the conclusion of a recent survey of Realtors statewide reported by the California Association of Realtors.

The bottom line? Lenders still have a long way to go, according to findings from the latest Lender Satisfaction Survey.

Sixty-four percent of California Realtors said they still had difficulty in closing short sales.

That’s a marked improvement from the 70 percent dissatisfaction rate in 2010 and 77 percent in 2011.

The survey gauges Realtors’ experience working with lenders in their most recent short sale transaction — a transaction in which a homeowner with a demonstrated hardship negotiates with the lender to accept less than the balance owed on the mortgage.

The most noticeable improvement came from the Realtors who reported short sales as “extremely difficult,” dropping from 56 percent in 2011 to 34 percent in 2012.

“While it’s encouraging that lenders and servicers are making headway in improving their short sale processes, they still have more work to do to ensure that not only Realtors, but also home sellers and buyers have a better experience when dealing with short sales,” said CAR President LeFrancis Arnold.

Recent changes announced by the Federal Housing Finance Agency to align Fannie Mae and Freddie Mac short sale guidelines will allow lenders and servicers to quickly and more easily qualify borrowers for a short sale. The changes are expected to further improve the process.

“CAR has long advocated for a standardized short sale process,” Arnold said. “Agreeing to a more standardized process may be the best way for banks, servicers, Realtors, and homeowners to facilitate the sale of homes that qualify.”

Communication issues also continued to be the main source of Realtors’ short sale transaction difficulties.

Communication issues included:

n Lenders’ slow response time to a short sale package, cited by 67 percent of Realtors in 2012, up slightly from 66 percent in 2011;

n Poor communication with lender representatives, cited by 55 percent in 2012, unchanged from 2011, and;

n Repeated requests for documentation, cited by 50 percent of Realtors, down from 51 percent in 2011.

Eight percent of Realtors reported that the lender foreclosed on the home before the short sale transaction could be completed, down from 15 percent in 2011.

Overall satisfaction in working with lenders in short sales improved over the past year, with 59 percent expressing dissatisfaction, down from 75 percent in 2011.

Additionally, more than six in 10 Realtors said they would not refer buyers to the lender for future home purchases, down from 78 percent in 2011.

“With short sales being a better option than foreclosure for both struggling homeowners and lenders,” Arnold said, “it’s important that lenders continue to improve their processes so that losses incurred by homeowners, lenders, and taxpayers are limited.”

Erika Kauzlarich-Bird is president of the Santa Clarita Valley Division of the Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.

 

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