The claim: Short sales closed in 30 days
In the housing industry where foreclosed homes are creating a sizable inventory backlog, professionals are continually looking for ways to condense processing timelines. But if a mortgage servicer says his or her company can complete a short sale in 30 days, are they being overly ambitious? Eric Friedman, president of PREO, doesn't think so. His 10-month-old company boasts the ability to accomplish this task. Through PREO.com, Friedman says he lines up banks, investors, servicers, real estate agents and buyers in a seamless process to transact a short sale in as little time as 30 days. Transacting a short sale is defined as the time between submitting the complete package to the servicer and closing the actual deal — a notoriously lengthy process. PREO removes price negotiation, notably the most time-consuming aspect of a short sale, from the process altogether by first getting in contact with the banks. As Friedman and his team work to clear title on junior and first liens, banks review a property and calculate the ideal price. PREO takes that value and submits it with all the other paperwork to the mortgage servicer, who then contacts the real estate agent with the bank's asking price. "When you push out price the bank is willing take for a property, it takes out ambiguity in negotiation," Friedman told HousingWire. "The starting point is clarity in price — assessing what does the bank want for this home, not what the borrower wants for this home." PREO closes all short sales through Albertelli Law based in Tampa, Fla. James Albertelli is founder and chief executive officer of PREO. Of the couple hundred short sales the company has completed since its inception, 32% have closed in the 30-day target, Friedman said. These short sales have predominantly occurred in Florida and California, PREO's targeted markets. Many other firms take great pride in condensing servicing timelines. Equator Financial Solutions launched an automated segmentation module last autumn, which runs financial analysis like net present values and performs a check of government regulations to produce a recommendation on how a servicer should handle the delinquent loan. It suggests disposition via a short sale, deed-in-lieu or loan modification, including looking into the viability of the Home Affordable Modification Program, or HAMP, and Home Affordable Foreclosure Alternatives, known by its acronym HAFA. JK Huey, a vice president at Wells Fargo (WFC), encouraged servicers one year ago to use strategies such as preliminary credit checks to speed up servicing timelines. She said the firm's goal was to streamline to short sale process to "around 30 days." But some niche distressed mortgage servicers say a 30-day short sale is about as practical as asking for rain in the middle of the Sahara Desert. "I'm not saying it's impossible," commented Don St. John, chief operating officer of Home Servicing out of Baton Rouge, La. "But I don't see where it is practically achievable." Home Servicing is a high-touch servicer that focuses on low-value loans in urban areas. In 70% of the cases St. John services, the borrower is not even in the home. Additionally, it can take 30 days or more just to track down the mortgagor, he said. The only way he can see a short sale being completed in 30 days is through "the perfect storm," on the right day, with the right offer, the right lender and the right negotiator. Gagan Sharma, president and CEO of BSI Financial, agrees with him. "My first question is, how do you count the 30 days? This is 30 days from what?" Sharma said in a HousingWire interview. BSI uses a combination of high-touch servicing tactics and technology to achieve quickened servicing processes. But to close one third of short sales in 30 days? "In the market we are in today, it's taking 30 days to go from signing a contract to closing because of financing," Sharma said. "That's cool and sexy, but is it even real?" Friedman has heard the criticism, but argues that efficient short sales are what his company is designed to do. When building PREO, the founding principles were to bring price clarity to market, make short sales a positive experience for realtors and process deals where the buyer is likely to walk, all within a manageable timeline. "We had no idea what that timeline would look like at first, but it ended up being between 30 and 45 days," Friedman said. "This is actually working today." Write to Christine Ricciardi. Follow her on Twitter @HWnewbieCR.