Foreclosures hurt everyone involved - homeowners, lenders, communities, and the economy as a whole. One of the options available for assistance may include the Short Sale.

A Short Sale is a workout option that allows the homeowner (mortgagor) to sell the home for less than the total amount owed on the mortgage. Upon final approval, a Short Sale can help mortgagors avoid foreclosure action.

Typically, the real estate agent takes charge of gathering all required documentation. This package must include:

from the real estate agent:

• Arm's Length Transaction document
• HUD-1
• fully-executed listing agreement
• fully-executed purchase contract

from the mortgagor:

• Signed and dated financial worksheet listing all monthly expenses
• Signed and dated hardship letter (an explanation of why the homeowner is unable to pay the mortgage)
• Letter authorizing the real estate agent access to information on the account (must be dated and include the last 4 digits of the mortgagor's Social Security Number and signature, the full account number and the complete property address)

from the mortgagor (continued):

• last two (2) years tax returns
• two (2) most recent bank statements (within 30 days)
• third party authorization form (to speak with real estate agent, attorney or other 3rd party)
• current year-to-date profit and loss statement (if self-employed)
• two (2) most recent pay stubs (within 30 days)

The real estate agent faxes the complete Short Sale Package to fax number provided, Attn: Setup.

Short Sale approval process

1. Once all documentation is received the short sale team completes a property valuation (appraisal or BPO per investor requirements).

2. The Short Sale file is then assigned to a negotiator on the Short Sale team who will review the file including the documentation and the offer.

3. If there is any missing documentation or request for more information, the Short Sale negotiator will contact the designated third party or the mortgagor.

4. Once all of the required documentation and information is received and in order, the Short Sale negotiator recommends approval to the investor and/or insurer. If the Short Sale offer is acceptable, the negotiator drafts and sends an approval letter to the borrower(s) and/or the designated third party. The Short Sale negotiator then works closely with the real estate agent, title company and the mortgagor to establish a final settlement date. The Short Sale approval may only be good for up to 30 to 45 days.

Additional Information

• If the Short Sale fails to close, the entire Short Sale package may need to be resubmitted with updated information, or the approval process may need to start over.
• Real estate agents are generally allowed 5% to 6% commission based on investor rules. If dual agency applies, maximum commission is 5%. Some investors operate on a reduced commission structure and the actual commission schedule can be confirmed during the introduction call.
• The Short Sale must be an “arm’s-length” transaction. The property may not be sold to anyone the seller has a close personal or business relationship with, including family, friends or neighbors.
• During the discussion with the short sale negotiator, the following may be addressed:
  • Commissions
  • Fees and costs
  • Pricing of the property
  • Timeline
  • Borrower Contribution
• In some cases investors and/or Private Mortgage Insurance (PMI) companies require mortgagors to
• make a cash contribution or sign an unsecured note for some or all of the difference between the net
• proceeds from the sale and the total amount due. This may be communicated as part of the response on a Short Sale offer.

Because there are often many parties involved in a transaction, and each Short Sale is different, it is difficult to know exactly how long the process will take. Here is an overview of the basic process:

• Complete short sale application received.

Note: Incomplete application will delay review/approval process.

• Property Evaluation completed (appraisal or BPO per investor requirement).
• Short Sale application assigned to Loss Mitigation Negotiator.
• Short Sale negotiator completes initial review of Short Sale application.
• Short Sale negotiator completes “Introduction Call” to real estate agent and homeowner.

Additional Steps:

• Mortgage insurer approval (if applicable).
• Investor approval (if applicable).
• Additional liens negotiated by real estate agent.
• A completed net sheet/HUD-1 (our payoff is not necessary).
• Fully executed purchase contract with all pages initiated by buyer(s) and seller(s).
• Buyer pre-qualification letter or proof of funds if cash offer.

All items above are complete.

• Short Sale application decision.
• Short Sale decision letters issued to appropriate parties.