The Sarasota Herald Tribune recently published an article that stated that Wells Fargo had a short sale incentive/fast track program in place. The article, which is consistent with other published articles we have seen, suggested that Wells Fargo would be willing to fast track short sale approvals and even make payments to short sale sellers under certain circumstances to encourage sellers to participate. As you can imagine, we received a flurry of phone calls and did some digging.

We contacted Wells Fargo’s media department, and they confirmed that Wells Fargo does indeed have such a program.  However, they could provide no details. We then had each of our five short sale team members independently contact several Wells Fargo negotiators regarding the article. In each case, the Wells Fargo negotiators denied any knowledge of such a program (and in one instance, did so after reviewing the article we supplied to them). Indeed, if Wells Fargo has such a program, it seems that none of the actual Wells Fargo short sale negotiators have actually been advised of the program.  

Please keep this in mind when establishing expectations for short sale sellers who have Wells Fargo mortgages.

Therefore, Buyers of property who require flood insurance are strongly advised to make application and pay for flood insurance before 5:00 p.m. on November 18, 2011 to avoid any flood insurance hiatus and be able to still close any time after November 18, 2011.

If that is not possible, an alternative is for the Seller’s existing flood policy to be assigned by the Insured Seller to the Buyer.

A reminder that cash buyers will still have a thirty (30) day waiting period from when they make application and pay the premium before their flood insurance can be bound, even if they apply for and pay for flood insurance prior to November 18, 2011. Please keep that important thirty day widow in mind when setting closing dates for cash Buyers who want flood insurance.

Please contact us if you have any questions.

As such, effective next week, when Berlin-Patten obtains a short sale approval, and the Buyer is unwilling or unable to close for some reason, Berlin-Patten  will offer the seller and seller’s agent the option to immediately publish to our extensive database of real estate professionals the pertinent terms of the previously approved short sale, such as approved price, lender timeframes, and buyer restrictions. This will only be done with the Seller’s and listing agent’s written approval, and we will only publish this information once a week.  

It is our hope that in providing this weekly service to our clients and referral sources, we can also offer anyone on our distribution list the opportunity to not only get relevant legal information through our blog entries, but now also offer them the opportunity to get the most recent information available on previously approved short sales that our firm has handled.

A word of caution!  A previously approved short sale is NOT a preapproved short sale, and in some cases, the lender’s will nevertheless require the process to begin anew. However, with a previously approved short sale, some lenders will not require the process to begin completely anew (or will offer a more streamlined approval process), but more importantly, the parties will have the benefit of knowing what the lender is likely to accept the second time around, thus maximizing the chances of a successful closing prior to foreclosure.

You can vote on which version you like at: http://www.consumerfinance.gov/knowbeforeyouowe/  (Click on Continue to Consumer Tool)

Starting this Friday, the buyer, seller, listing agent, and selling agent involved in any closing that is being handled by Berlin Patten will receive automatic weekly closing status updates that will include general information pertaining to the transaction, a calendar of critical deadlines, the status of significant events relevant to the closing, and a log of significant notes/comments.

The information will hopefully be very useful to the parties, and will be in addition to the frequent attention and communication that you will receive from your Berlin Patten closing team, which in every case includes a processor, paralegal, and attorney. The weekly closing status updates will begin this week for any matter that is scheduled to close with Berlin Patten after November 1, 2011.

With regard to our short sale process, so that we do not provide duplicative weekly updates, please note that any short sale matter that is being negotiated by Berlin Patten or a third party will continue to receive the short sale weekly update until the matter has been fully approved. The weekly closing status notifications will begin once the short sale matter is fully approved and delivered to Berlin Patten’s closing team.

Like the weekly short sale notification, we believe that the weekly closing status notification will be an extremely useful tool. Because it is the first of its kind in the region, please bear with us over the first several weeks as we iron out any kinks or glitches. We think you will be very pleased with the final result.

In last month alone, there was a significant increase in new foreclosure filings in both Sarasota and Manatee courts. In addition, both lenders and the courts are beginning to push the stagnant cases out of the court system. With approximately 45% of all homes in Florida still underwater, we may not see a decrease in foreclosures for quite some time.

It is very important for homeowners who are served with foreclosure papers to seek the advice of an attorney immediately. The owner has a short window of time to respond to the complaint without losing his or her rights to defend the action. In addition, a lender will not stall or delay a foreclosure proceeding simply because the property is listed or under contract for a short sale. For most homeowners, short sale is the best option for distressed properties. Because it can take three to six months (or longer) to close a short sale, the property should be listed sooner rather than later, and the homeowner should defend a foreclosure action to ensure that the property does not foreclose before a short sale can close. Berlin-Patten offers a wide range of foreclosure defense, short sale and other services based on the individual needs of a homeowner. We offer reduced flat-fee rates for foreclosure defense to our short sale clients and can aggressively defend an action if needed.

•  Short sales are about two primary things to Bank of America:  Hardship and net proceeds
• Investors are reluctant to postpone foreclosures as the buyer may not hang in. There is NO difference to the investor whether it is a cash buyer or a financed buyer.
• When short sales initially became prevalent, negotiators had on average a 600 case workload. The average now is 100 files.
• Average number of days from initiation of short sale approval process to short sale decision is 50 days (Negotiator Comment: HAFA files take twice that long, if not more)
• New cooperative program: Relocation money can be used for other liens, cash contribution towards delinquency, and HOA fees. BOA is communicating this program to homeowners by phone and e-mail. This program is offered for those who apply 9/26/11 – 11/30/11 and only to those who do not yet have an offer.
• HAFA – Both the 1st & 2nd liens have to participate or they are not eligible. The homeowner has to find out if the investor on both loans participates in HAFA by calling their lender.
• BOA is the servicer for the investor. They are NOT the investor and do not own the loan. BOA has 500+ investors. Each loan may have several investors who have to approve the short sale. Each investor has their own individual requirements. What may be acceptable to one investor may not be acceptable to another. ALL have to agree to the terms. Whenever you have to go back and ask for an extension, deficiency waiver, negotiate a cash contribution, etc., the negotiator has to go to each investor for approval. This is why it takes time and why it may not be approved. BOA has “delegated loan authority” for some investors which means that they can make decisions within prescribed investor guidelines. They also have “non-delegated” loans in which the investor must make the decision. Each loan may have both types of investors, if more than one.
• If the property has structural damage, the investor requires that the seller file an insurance claim and present the proof of claim.
• Property valuations are good for 90 – 120 days. Why can’t BOA share the value? Answer: “Because you didn’t pay for it.” A question was asked by someone in the audience, “What if we agree to pay for it?” Answer: “You still can’t have it.”
• For FHA & VA loans, you can request and receive the appraisal.
• The valuation for a sole property is not necessarily the sole determinant for approval. Investors are making the decision based upon the whole neighborhood, not just this particular property, especially if they have invested in multiple properties in that neighborhood.
• You can request reconsideration of value. You must provide comparables, pictures (a big thing if problems with the property!), bids for structural damage (need 3 bids).
• Questions to ask prior to the short sale:
• How many investors?
• Is there MI insurance?
• Is there an evaluation on record and when does it expire?
• NOTE: The homeowner should call and ask the above questions as they need to be known before the short sale is submitted.

The Berlin Patten short sale team will continue to keep you abreast of each lender’s specific rules and guidelines. We plan to specifically address some of the topics above in more detail at a later date, however, in the meantime, please contact us if you have any questions. And please keep in mind that this is what Bank of America advised us. It does not mean that we necessarily agree with some of their contentions.

Buyers of property that require flood insurance are strongly advised to make application and pay for flood insurance before 5:00 p.m. on November 18th to avoid any flood insurance hiatus and be able to still close any time after November 18, 2011. 

A reminder that cash buyers will still have a thirty (30) day waiting period from when they make application and pay the premium before their flood insurance can be bound, even if they apply for and pay for flood insurance prior to November 18, 2011. Please keep that important thirty day widow in mind when setting closing dates for cash Buyers who want flood insurance.

Please contact us if you have any questions.

It remains our opinion that any title agent involved in the “negotiation” of short sales should also be licensed to practice law in the state of Florida or be a licensed mortgage broker. If they are not, Florida law provides for somewhat severe sanctions. We do not disagree with the fact that a non-lawyer or a title agent can merely request a payoff from a lender. In our opinion, however, that ministerial or clerical task does not constitute short sale “negotiations” and such conduct was not the focus of our blog entry.

The response to our blog entry cites potentially misleading material.  Specifically, the Opinion (dated 8/19/10 to which the Blog entry refers) addresses a very narrow issue, namely the ministerial or clerical act of requesting payoff information and furnishing certain documents in connection therewith. The blogger fails to address the focus of our concern, namely those title agents who are either intentionally or unintentionally performing true short sale negotiations. Our concerns are fairly simple.

First, the Florida Bar has begun to weigh in on the subject and has conducted hearings addressing the issue of whether short sale negotiations constitute the unlicensed practice of law.  While no definitive conclusions have yet been reached by the Bar, it is our opinion that the act of truly “negotiating” a short sale involves a great deal more than the ministerial or clerical function of “paper pushing,” and therefore constitutes the practice of law. In fact, we believe that the term “short sale negotiations” encompasses almost everything except the simple request for the short payoff. We feel the Bar will ultimately draw that same conclusion.  In fact, the attached article, published in the Winter of 2010 in ActionLine, entitled, “Nonlawyer Assisting the Short Sale Seller: Ministerial Act or UPL,” provides an opinion consistent with that of Berlin Patten. Indeed, the essence of “negotiating” short sales involves not the initial request for a payoff, but among many other things the following:  the negotiation of and/or consultation with respect to deficiency balances, promissory notes, payoff terms, language of approval letters, post closing restrictions, and the language of documents that short sale lenders require the parties to execute at or prior to closing.

The definition of what a short sale “negotiation” might involve became much more important after the Florida legislature passed a bill effective January 1, 2010 (and modified most recently in July, 2011), wherein it became unlawful for any person to “act as a mortgage broker” in Florida without a current, active mortgage broker license. The definition of a mortgage broker is now defined in Section 494.001 Florida Statutes as ”…for compensation or gain, or in the expectation of compensation or gain, directly or indirectly, accepting or offering to accept an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a borrower, NEGOTIATING OR OFFERING TO NEGOTIATE THE TERMS OR CONDITIONS of a new OR EXISTING LOAN on behalf of a borrower or lender…” (Emphasis Added).

In the Spring of 2010, the Florida Land Title Association, which is the mouthpiece for title agencies throughout the state of Florida, in an attempt to protect its agents from potential criminal liability associated with this new statute, published its report in response to the new legislation (a copy of the first two pages thereof is attached), and interpreted the legislation as follows “with respect to the title agent’s business, unless you are a licensed mortgage broker or attorney representing a client in the negotiation of a short sale, you are prohibited from negotiating a short sale. Whoever knowingly violates these statutes commits a felony of the third degree. Each such violation constitutes a separate offense.” Sec. 494.0018, Florida Statutes.

This is an extremely definitive, unambiguous opinion, and there is no “compensation” exception or other caveat therein for those title agents who might be negotiating short sales for “free,” as the anonymous blogger infers. The reason is simple, the FLTA clearly recognizes that title agents who are negotiating short sales would only be doing so if they expected indirect compensation (something that is also prohibited by the statute), namely to get the fees associated with the eventual closing of the transaction (if they are successful in getting it approved). They are not doing the work out of the kindness of their hearts.

While the Opinion referred to in the anonymous blog and the FLTA each agree that a title agent who is merely requesting estoppel information or merely providing documents would generally not be considered engaging in “negotiations” (and we agree), neither stand for the proposition that a title agent conducting true short sale negotiations is somehow exempt from Sec. 494.0018 Florida Statutes, whether or not they get paid directly for their work, and any suggestion to the contrary is extremely dangerous.

From and after January 1, 2010, it became unlawful for licensed title agents to conduct true short sale negotiations unless they were also a lawyer or licensed mortgage broker, and it remains our opinion that the act of conducting short sale negotiations by title agents (whether for compensation or not) should be performed only by one who is also an attorney or a licensed mortgage broker. Any title agent who is conducting short sale negotiations from or after January 1, 2010 should use great caution to determine what extremely limited activities they can or cannot perform, particularly given the severe sanctions associated with a violation of Section 494.0018.

Other than a pre-approval under HAFA, there is really no such thing as a “pre-approval.” It is likely that the intent was to suggest that a short sale was “previously approved,” and therefore a new approval should be “easy.”  There is a big difference between a “pre-approval” and “previously approved.”  In some instances, such as the HAFA Program or Bank of America Cooperative Program, the purchase price has in fact been pre-approved by the lender and this pre-approved price is legitimate. 

However, in most instances, the use of the term “pre-approved” really means that a prior transaction and a prior buyer was previously approved, but for some reason, that transaction failed to occur. However, when that happens, most lenders will close their file and require the short sale process to start over from scratch.

At best, after some persuasion, the short sale lender may agree to keep the file open or re-open a prior file, but they will still need to re-approve the contract terms and the new buyer. This can take weeks, if not months with some lenders, and usually requires the seller to submit updated information again, not to mention the fact that some lenders will need to obtain a new BPO.

And in many cases, the terms of the new approval (if the seller is lucky enough to get a second approval) can vary from the terms of the first approval. In fact, we recently experienced a situation where a lender approved a short sale and agreed to waive the deficiency, the buyer walked, and when the lender reapproved the short sale, they refused to waive the deficiency the second time around.

The moral of the story…beware of properties being marketed as “pre-approved.”  That may not mean what you think it means, and it may not mean that your transaction will close any faster.