Review and Approvals. 2 Short Sales. 3 Short Sales. 4 Short Sales. 5 Short Sales. 6 Short Sale is approved! Now what? 7 What s the next step?

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1 2 Short Sales Review and Approvals Presented by: Kelly Ashton Underwriting Specialist 3 Short Sales A Short Sale occurs when the homeowner owes more on their mortgage than the price for which the property can currently sell in today s real estate market. 4 Short Sales Just as some buyers make a contract to buy contingent on loan approval, short sale sellers add their own contingency for short sale approval in their contract to sell. Lienholders have to agree to accept less than what is owed to them. Some lienholders will agree to a short sale with or without conditions or additional terms, but others will not approve the short sale at all. 5 Short Sales Unfortunately the word Short in Short Sale does not refer to the length of time it takes for a short sale to be approved or denied. It refers to the shortfall in the amount of money the lender receives. Some short sales can take up to 3-9 months to be approved. There are several factors that can speed up or slow down a short sale approval. 6 Short Sale is approved! Now what? The majority of what needs to be done (loan processing, appraisal, title work, termite, etc.) typically isn t done until the bank has approved the short-sale in writing. The reason for waiting until then is that all of those things cost money and no one wants to spend the money and resources before knowing for sure that the short-sale will be approved. 7 What s the next step? Compare the Title commitment to Each Short Sale approval letter: All sellers names Do they match, if not, why? Subsequent conveyance, divorce, death, one of the parties was not the borrower on the Promissory Note One conveyed their interest Divorce» Both are on the loan, both must sign Death» Has the Short Sale lender been notified? All buyer names, if applicable Short Sale lenders won t allow for the buyer to change without their approval Get letter revised if different 8 Sales price Red flag if they don t match Have approval corrected (or title commitment) 1

2 Lender(s) of record to be satisfied If different - need an Assignment of Mortgage or proof of the Short Sale lender s authority to power to negotiate a short pay of the loan Mortgage Electronic Registration Systems (MERS) Servicing Agreement Power of Attorney 9 Reviewing the Short Sale Letter Review Short Sale letter contents Property address Expiration date of approval letter Get extensions in writing Funds allocated to Junior lien holder(s) Amount matches junior lien holders payoff letter Approval covers both 1 st and 2 nd loans Show on HUD-1 Line 504 PAYOFF OF FIRST AND SECOND MORTGAGE TO Reference both loan numbers on wire transfer Separate wires for each loan?? 10 Junior lien requires more money than the 1 st mortgage will allow Lender to approve if someone is paying difference Promissory Note / Repayment agreement Follow instructions Bankruptcy Verify the seller(s) have not filed for bankruptcy Ask search provider to run a PACER search Watch for language If in bankruptcy approval is null and void Chapter 13 No new debt, i.e. Promissory Note 11 Subject to conditions of documentation you are not in possession of Affidavits, addendums, agreements -must review Arm s Length Affidavit Confirm with negotiator one does or does not exist Addendums, amendments, agreements Deadline to return all documentation Caution with Promissory notes Documentation to send prior to closing 12 Reviewing the Short Sale Letter Right to revoke/rescind or adjust the approval for any reason Closing costs Do they cover everything? Liens Judgments HOA or Condo dues/assessments Commission to Realtor(s) Seller s contribution Mortgage Insurance (MI) Approval required, if applicable Verify in writing MI approval was received 2

3 13 Reviewing the Short Sale Letter Release of mortgage language Revise letter to add language Conditional or preliminary approval letters Must obtain Final approval letter Final closing instructions Prohibition for use of POA (seller/buyer) Resale Restrictions 14 HAFA approved transaction Approvals do not always disclose HAFA guidelines Program Terms and Conditions MI Approval, if applicable 90 day resale restriction Junior lien holder to release borrower of all liability Arm s length transaction Relocation incentive 15 Resale Restrictions Resale restrictions are inserted in the Short Sale approval in various ways. The can be located in: Short Sale approval letter Affidavit of arm s length Addendums HAFA guidelines Program Terms and Conditions 16 Resale Restrictions If your Short Sale approval has a resale restriction, TRGC suggest the buyer execute an affidavit to contain the following language: Affiant attests that he/she has no knowledge of any future sales transactions or transfers involving said Property that will occur simultaneously to, in conjunction with, or that would occur within days of the current purchase of the Property. 17 Resale Restrictions TRGC suggest the following NOTE to be added to the deed requirement in your title commitment: Add the following NOTE TO THE DEED REQUIREMENT (IN BOLD) under B-1: NOTE: The deed required herein shall contain the following recitation or some reasonable approximation thereof: "There are to be no transfers of the above described property within days of the closing of the sale from to. 3

4 Fill in the amount of days and names of the seller to the buyers in the blanks 18 Resale Restrictions By adding the NOTE to B-I, you ll need an Exception to Schedule B-II of the commitment as follows: Restriction imposed by unrecorded Short Sale Approval Letter from, as follows: There are to be no transfers of the property within Days of the closing of the sale from to. Fill in the name of the Short Sale lender, amount of days and names of the seller to the buyers in the blanks 19 What s needed next? Review Title commitment for any further items of concern; such as: Recorded Lis Pendens Send written notification to the Plaintiff s attorney to put them on notice of your pending closing with Short Sale approval Recorded Final Judgment of Foreclosure Verify the foreclosure sale date; how much time do you have? TRGC requires that the sale closes and funds at least two (2) business days prior to the scheduled foreclosure sale Sale date was cancelled Foreclosure docket should show Motion and Order to cancel sale Call Foreclosure clerk as close to the closing as possible to verify the sale has not been rescheduled. 20 What s needed next? Liens Does the approval letter provide for closing funds to payoff any liens? Judgments Does the approval letter provide for closing funds to payoff any judgments? POA Short sale lender to approve the use of POA in writing for all parties 21 CHECKLIST Short Sale Letter Review 22 CHECKLIST Seller(s) name matches approval, sales contract and commitment Buyer(s) name matches approval, sales contract and commitment Sales price matches approval, sales contract and commitment Lender of record matches approval Property address matches approval Release of mortgage verbiage Expiration date Allocation of Funds to Junior Lien Holder Promissory Note Bankruptcy Conditions: Affidavits Agreements Addendums Documentation deadlines Right to revoke or rescind approval Closing costs limitations Commissions limitations Seller contribution MI approval (if applicable) Final HUD-1 approval from all Short Sale lenders Final closing instructions (if applicable) POA approval by all Short Sale lenders Reviewed all conditions Resale restrictions Buyers Affidavit Exception to B-II NOTE on Deed 23 CHECKLIST Title Commitment Review 4

5 Recorded Lis Pendens Notified Attorney for Plaintiff Recorded Final Judgment of Foreclosure Foreclosure sale date is less than 2 business days from closing/funding date Docket shows Motion and Order cancelling sale Verified with Clerk s office sale has not been rescheduled Payoff of Liens obtained Payoff of Judgments obtained 24 Reminders Never close with an expired approval letter Never accept a verbal extension Update your title commitment before you close Obtain Final HUD approval in writing If something changes after its approved, get another approval in writing 25 Reminders Follow same guidelines provided here today for all junior lien holder payoff approval letters If anything changes, i.e., seller, buyer, sales price, use of a POA, always get it approved in writing As the settlement agent, if you have knowledge of any pending future sales, notify the Short Sale lender in writing. 26 Overnight via express service All conditional documentation (as applicable) Promissory Notes POA Affidavits, addendums, agreements Signed approval letter Approved Final HUD-1 Statement with no material changes from what the short sale lender approved. Cashier s check to payoff loan (if not wired) 27 Reminder When insuring title that involves a previous short sale even if there was no resale restriction TRGC will not waive its customary requirements in the current transaction regarding the prior short sale mortgage (i.e., dismissal of suit and cancellation of lis pendens, satisfaction of mortgage, etc.). 28 Bottom Line TRGC s ultimate objective is to be sure that the payoff lender is contractually obligated to record a release or satisfaction of the mortgage! 5

6 29 Thank you for your time and Commitment to Excellence! 6