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What Happens When the Service is Released on Your Short Sale?

27 Jan

Most mortgage loans are contracted out to be serviced by a third party servicer to perform such activities as collecting payments, tax and collection activities, as well as default mortgage activity, includingshort sales. Release of service, where the investor decides to move the servicing activities from one company to another, is business as usual in the in the mortgage industry. However, it can be a real pain in the case of a short sale transaction already in process. Short Sale Realtors should make homeowners aware of this possibility when considering a short sale, so they can keep an eye out for a notification letter. A homeowner should receive notice of such a transfer 15 days prior to the service release date.

We are currently seeing a lot of service release activity among some of the larger servicing companies. The company servicing the most loans is Bank of America. The following is a table of possible impacts on a short sale taken from the Bank of America online agent resource center. The impact varies among servicing companies but this will give you an idea of the possibilities and what you can do to be proactive when a service release occurs during your short sale transaction.

What are the impacts to a short sale?

Short Sale initiated but no approval letter issued

Traditional When servicing rights are released from Bank of America, the new servicer will decide how to proceed with the loan retention options.
HAFA The new servicers may participate in Home Affordable Foreclosures Act (HAFA).The new servicer will need to review the file documents to make a decision on the short sale.
Cooperative The new servicers may not honor the cooperative short sale since this program is proprietary to Bank of America.When possible, Bank of America will request to maintain servicing of loans in the cooperative short sale program through short sale completion or decline.

Short Sale with an approval letter issued and a closing date established

Traditional The new servicers will honor the approval letter terms up to the expiration date listed on the approval letter.
HAFA
Cooperative The new servicers may not honor the cooperative short sale since this program is proprietary to Bank of America.When possible, Bank of America will request to maintain servicing of loans in the cooperative short sale program through short sale completion or decline.

Some key activities that may occur during the servicing transfer:

The old servicer should send the homeowner a letter 15 days before servicing transfer date.

The new servicer should send a letter advising the homeowner of the transfer.

NOTE: IF A LETTER IS NOT RECEIVED FROM BOTH COMPANIES ALWAYS CHECK WITH THE OLD SERVICER TO MAKE SURE IT IS A REAL TRANSFER AND NOT A HOAX OR FRAUD. THERE HAS BEEN A LOT OF DECEPTION IN THIS AREA.

What should the homeowner and their short sale realtor do?

Contact the new servicer to determine the options available to the homeowner.

Keep in mind; it may take 30 days or more for the new servicer to access the loan.

Keep copies of all documents on the short sale transaction in case the new servicer requests documents

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Posted by on January 27, 2013 in Short Sales

 

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