Wells Fargo short sales will not be extended to stop foreclosure for certain sales
Wells Fargo & Co. has stopped granting extensions for certain distressed homeowners to complete short sales
Wells Fargo said it changed its policy on short sales at the request of investors for whom it services mortgages, including the government-sponsored enterprises.
Early last month, Fannie Mae told its servicers to stop unnecessarily delaying foreclosures. The GSE said it would hold servicers responsible for unexplained delays to foreclosures with fines and on-site reviews.
In a memo e-mailed to short sale vendors last month and obtained by American Banker, Wells said it will no longer postpone foreclosure sales for those who do not close short sales by the date in their approval letter from the company. Only extension letters dated Sept. 14 or earlier would be honored, Wells said.
Certain short sales can still receive extensions if they meet conditions
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A spokeswoman for Wells Fargo, confirmed that Wells still grants extensions on loans in its own portfolio (including those it acquired with Wachovia Corp.) and in cases where investors allow it.
For those two categories, Wells allows one foreclosure postponement, provided these conditions are met:
- A short sale has been approved by Wells, by junior lien holders and by mortgage insurers
- The buyer has proof of funds or approved financing
- The short sale can close within 30 days of the scheduled foreclosure sale
The new policy on short sales was put in place over the past couple of months in response to various investor changes including the GSEs, HUD and those investing in private-label mortgage-backed securities.
Wells’ decision also follows efforts by the Obama administration to encourage short sales for borrowers who do not qualify for loan modifications
Experts on short sales said that in recent months servicers have been reluctant to approve the transactions out of concern that they will fall through, further prolonging the process.
“There is also a growing issue with the new buyer and financing issues, either losing their jobs ahead of closing or the new lender not being ready to close, which then gives rise to the buyer running out of patience and walking,” said Jim Satterwhite, executive vice president and chief operating officer of Infusion Technologies LLC, a Jacksonville, Fla., provider of short sale services.
Satterwhite said many servicers have reached the point where they know which borrowers do not qualify for a modification and are moving those borrowers through to foreclosure to deal with the backlog of inventory. “A lot of servicers are just falling in line with Fannie,” he said.
Push for expediting short sales due to concern over further fall in home prices
Moreover, the expectation that housing prices will fall further is forcing servicers — and the GSEs — to push for a quicker resolution through foreclosure, since short sales can involve further delays. “Values are dropping faster and that also means the losses on short sales are going up,” Satterwhite said.
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Source: http://www.americanbanker.com/bulletins/wells-curtailing-short-sale-extensions-1026657-1.html
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