Short Sales A guide to working with Wells Fargo J.K. Huey, CMB, AMP Senior Vice President Wells Fargo Home Mortgage National Association of REALTORS New Orleans, LA November 7, 2010
1 Strategic Partnership Wells Fargo and Our REALTOR Partners Wells Fargo s primary concern and obligation is to our customers and investors. Our goal is to exhaust all efforts to help customers remain in their homes through various workout options. Once home retention efforts are no longer an option, Wells Fargo continues to work diligently to provide alternatives to foreclosure through short sales or deeds-in-lieu of foreclosure. Our last resort is to foreclose. Our partnership with experienced real estate brokers and their agents, familiar with the management of distressed real estate, is key to our success and commitment to quality service. Our REALTOR Partners expertise helps us to deliver timely solutions to assist customers, minimize losses to investors, and help to rebuild and stabilize our communities. These are unprecedented times in our industry, and now more than ever it is critical that we partner together as leaders in driving solutions and results to help in the recovery of a strong housing market. Our REALTOR Partners help us by providing their: - Familiarity with local market trends and community goals - Established relationships with the real estate community - Expert knowledge in short sale and REO liquidations - Strong customer service and communication skills
2 Short Sale as an Excellent Alternative to Foreclosure A Short Sale is a solution that allows the customer to sell the home for less than total amount owed. When all home retention solutions have been reviewed and exhausted, we immediately begin working with the borrower to determine if a short sale or deed-in-lieu can be accomplished. A Short Sale Benefits Everyone Customer Benefits Alternative to foreclosure with planned & graceful exit, Wells Fargo or Investor pays closing costs and incentives in certain cases, credit report reflects Settled for Less than Owed. Buyer Benefits Usually home is in better condition than buying a foreclosed property. Wells Fargo Benefits Average of 10% savings over REO, reduced losses and corporate advances, eliminates nonperforming asset. Junior Lien Holder Benefits Higher debt payment resulting from short sale versus foreclosure transaction. Community Benefits Occupied and maintained properties, stabilizing neighborhoods, preventing vandalism and other crime.
3 Primary Concerns or Myths Surrounding Short Sales Top concerns provided through external surveys and our own internal escalated complaints. Primary Concerns and Myths Difficulty of obtaining mortgage financing appraisals a special sore spot. Fall-off in First Time Homebuyers affects overall demand. Banks are holding shadow inventory in the hopes values will increase. Lost documentation, multiple submissions. Short sale process takes too long and I lose potential buyers. There are a number of decision makers involved in a short sale the more parties involved, the more complex the process becomes. All parties must be aligned before the home can be sold, i.e., investors, second lien holders, and mortgage insurance. Most importantly, this is not a typical buy-sell transaction.
4 Partnering to Improve the Short Sale Process We have worked to improve our processes and communications regarding short sale transactions. We hear your concerns and are working diligently to reduce the completion timeline and improve communication. Internal Improvements to Short Sale Process: Staff resources have been increased by 57% over the last 12 months to ensure forecasted volumes can be managed. Proactive marketing efforts to provide information and education on short sale workout alternatives to customers. Wells Fargo is leveraging new technology to provide a direct portal access for agents and customers. Our field negotiator team and branch offices are expanding to support more difficult markets for customer face-toface assistance, and for seminars and training for agents. Prioritization of short sales when buyers are eligible for Homebuyer Tax Credit. Wells Fargo is Persistent and Continuously Focused on Third Parties to Improve the Short Sale Process Wells Fargo has led discussions with Fannie Mae and Freddie Mac, resulting in increased delegation authority, foreclosure prevention, and streamlining processes. These efforts have resulted in industry wide solutions. We have partnered with Treasury to provide guidance on rules for the HAFA program. Expanding our REALTOR Finder Tool to leverage experienced agents in all markets for referring our customers. Participation in Congressional Hearings and other government meetings to further educate and inform on existing processes and concerns. Communication and Education Multiple communication materials have been prepared for HMC s, Agents, Customers and Real Estate Consultants Cinemeetings were conducted to provide consistent information across the country to address concerns and provide detailed steps necessary to complete a successful short sale.
Home Affordable Foreclosure Alternatives Presentation for the National Association of Realtors
HAFA Overview Home Affordable Foreclosure Alternatives (HAFA) Provides alternatives Short Sale (SS) and Deedin-Lieu of foreclosure (DIL) when home retention options are exhausted. Standardized process offers graceful exit to proactive homeowners: Releases homeowner from future liability. Provides $3,000 relocation assistance. Encourages cooperation from subordinate lien holders. Effective April 5, 2010 Dec. 31, 2012. 6
HAFA Servicer Participation HAFA rules apply to non- GSE servicers. All 124 HAMP-participating servicers required to develop written standards for HAFA application. Servicers must apply HAFA standards consistently. Participating servicers listed at MakingHomeAffordable.gov. Benefits to servicer and investor: $1,500 servicer incentive $Up to $3,000 reimbursement to investor for release of subordinate liens 7
HAFA Eligibility Criteria Homeowner: Is owner-occupant Property may be vacant <90 days if homeowner required to relocate 100+ miles for work Loan: Amount owed on 1 st mortgage equal to or less than $729,750 Mortgage originated on or before January 1, 2009 First mortgage payment (PITI + homeowner association/ condo fees) is greater than 31% of homeowner s monthly gross income Homeowner must not have not been convicted within the last 10 years of any one of the following in connection with a mortgage or real estate transaction: felony larceny, theft, fraud or forgery; money laundering; or tax evasion. 8
HAFA Short Sale HAFA Short Sale releases homeowner from future liability for debt Servicer allows homeowner to sell property for less than full amount due on mortgage. Servicer accepts payoff in full satisfaction of mortgage. Servicer approves short sale terms prior to listing using standard forms and specific timeframes. Alternatively, servicer may approve short sale at homeowner request for property already on the market. 9
HAFA Pre-Approved Short Sale Process Trigger event occurs Servicer has 30 calendar days to offer consideration under HAFA (or HAMP). Homeowner has 14 calendar days to respond with request for consideration for HAFA (or HAMP). Servicer has reasonable amount of time to determine minimum acceptable sale amount and to offer SSA to homeowner. Homeowner has 14 calendar days to return SSA to servicer. Homeowner and/or listing agent has minimum of 120 calendar days to market property. Homeowner and/or listing agent has three business days to submit offer with RASS or ARASS to servicer. Servicer has 10 business days to approve the offer. Servicer schedules closing for no less than 45 calendar days. Upon closing, homeowner receives $3,000 relocation assistance. 30 DAYS 14 DAYS REASONABLE TIME 14 DAYS 120+ DAYS 3 DAYS 10 DAYS 45+ DAYS Homeowner Does not qualify for a Trial Period Plan Does not successfully complete a Trial Period Plan Is delinquent on a HAMP modification Requests a short sale or DIL 10
HAFA Deed-in-Lieu of Foreclosure HAFA DIL releases homeowner from future liability for debt. Homeowner voluntarily transfers ownership of mortgaged property to servicer in full satisfaction of the total amount due. Servicer may require homeowner to list and market property before agreeing to DIL. Homeowner provides marketable title, free and clear of other mortgages, liens, and encumbrances. HAFA incentives also available on Deed-to-Lease options. 11
HAFA & Hardest Hit Funds 18 States Plus DC Six states have Short Sale programs: California Nevada Ohio Oregon Rhode Island South Carolina For the list of participating State Housing Finance Agencies, go to FinancialStability.gov/roadtostability/hardesthitfund.html. 12
HAFA Challenges Working to make HAFA better. Treasury listens to industry feedback. Borrower with an offer in hand unwilling to submit HAMP eligibility documentation. 31% DTI limits borrower eligibility. Properties vacant longer than 90 days. Subordinate lien holders unwilling to release borrowers from liability. Subordinate lien holders hold out for greater than 6% or $6,000 payoff. 13
HAFA Resources HMPAdmin.com provides HAFA guidelines, borrower documents, and a way to get answers to your questions. Get help with questions about HAFA at ssdil@hmpadmin.com. 14
Trusted Advisors Escalate Tough Cases HAMP Solution Center helps trusted advisors with cases that are difficult to resolve. Visit the HAMP Solution Center at HMPadmin.com. 15
Discussion/Questions Thank You 16