On Monday, January 7, 2013, the Office of the Comptroller of the Currency and the Federal Reserve announced they were canning the much maligned and deeply flawed "Independent Foreclosure Review" program and instead had reached an agreement with 10 of the country's largest Mortgage Servicers. Although the $8.5 billion dollar settlement agreement has already elicited criticism for being fuzzy on details and potentially offering a less than generous payout to wronged homeowners (estimates put the amount per borrower somewhere between $870 and $2,200), it could be very good news for those who have determined that they no longer wish to keep their home and need to sell it as a short sale.
The reason it may be good news is that $5.2 of that $8.5 billion is actually in the form of "credits" that servicers will receive for actions they take to avoid foreclosing such as loan modifications and short sales. And, if the servicers stay true to the course that the Big 5 (Bank of America, Chase, Wells Fargo, CitiMortgage and GMAC/Ally Financial) charted in doling out the $25 billion dollar settlement they reached with the State Attorneys General in last February's National Foreclosure Settlement, most of that $5.2 billion will go toward short sales.
Why would they focus on short sales? Well, first of all, these servicers have proven over and over again that they just can't/don't want to modify loans. Every attempt at modification programs has resulted in abject failure with very low numbers of permanent modifications achieved and high redefault rates. Secondly, it is speculated that by focusing on short sales they can skip the arduous foreclosure process as well as the need to manage, maintain and market the foreclosed properties thereby saving themselves money which would be in their best interest.
The ten servicers involved in Monday's agreement are Bank of America, Chase, Wells Fargo, CitiGroup, MetLife, PNC, Sovereign, SunTrust, USBank and Aurora.
For more information on this settlement or short sales in general, please don't hesitate to contact me at (603)490-5344.