Joe Filoseta is the CEO of Washington-based DepotPoint
, which provides technology to automate distressed property sales and recently joined forces with AssetPlanUSA
. Before joining DepotPoint, Joe served as executive vice president and general manager of the Mortgage Solutions Group of Harland Financial Solutions
. Today, he sat down with HousingWire
to go over the promise and pain of short sales.
Short sales is the hot word in the industry, but are they a better option than a modification or a deed-in-lieu? Who wins? Who loses?
Short sales are preferred to foreclosure in most cases where a borrower does not qualify for a modification, cannot afford the payments on a modified loan, or needs to relocate and does not want the property anymore. Deed–in-lieu can also be a good solution where clear title can be delivered to the bank, but many properties in default have more than one lien attached, making clear title difficult to deliver. In today’s declining market, most investors would like to recover fair market value for their asset sooner rather than later, servicers would prefer not to incur the cost of a foreclosure, and borrowers would like to do their best to meet their financial obligations. When a loan modification does not make sense for the borrower, a short sale can be a win-win solution for everyone involved.
Win-Win does sound nice. But what is the biggest challenge in conducting a short sale, and how can those in the operation overcome them?
The single largest issue for servicers is collecting all the required documents from the borrower. The largest challenge to borrowers is getting the lender or lenders to agree to an offer in a timely manner. To handle both of these challenges, servicers need to implement clearly defined processes for dealing with short sale opportunities. This includes tools and systems that support the document collection, property valuation, and offer evaluation in the context of a short sale. Solutions such as TrackPoint, which provides servicers a structured approach to managing short sales so that even inexperienced teams can efficiently do their jobs, will go a long way to overcoming these challenges.
HAFA is touted as a backstop for borrowers who can't meet the HAMP requirements. What are some of the loose cracks in that backstop though?
HAFA's goal is to standardize a very non-standard transaction and help more borrowers gracefully exit homes they can no longer afford. Borrowers that can complete short sales that comply with HAFA’s standard approach will receive some basic assistance and a fresh start. However, many short sales have second liens, and HAFA’s prescribed payouts for junior lien holders may often be insufficient financial incentive for them to approve a sale. In these cases, it is difficult to complete a short sale that otherwise qualifies for public assistance and a release of future liability.
Servicers are struggling under the weight of HAMP. Is HAFA only going to cause more backlogging problems?
In addition to providing an alternative for borrowers who do not qualify for a HAMP modification, proposing a HAFA short sale may motivate borrowers stuck in the loan modification process. Many HAMP eligible borrowers are delaying the modification process or rejecting modification proposals. As a result, servicers are extending modification trial periods and looking for other solutions for borrowers that reject modifications. But once a short sale is proposed as a last alternative to foreclosure, many borrowers are reevaluating and accepting the original loan modifications proposed and completing the required documentation. Overall, HAFA will help servicers identify an end to the loss mitigation process with the borrower and enable them to move forward with a modification, short sale or deed in lieu – effectively eliminating the default logjam.