BofA Event at Marriott
The distress pipeline in general is still persistent and a worthy topic, despite our Half Moon Bay-Coastside’s relatively minimal levels of distressed sales to date. In fact, just yesterday, Matt Vernon, Bank of America Senior VP, REO and Short Sale executive, noted at an industry event at the San Mateo Marriott that we can expect more short sales in the coming year as the foreclosure alternatives for borrowers currently in the pipeline are exhausted. Realtors have been craving factual updates from the lending industry so that we can do a better job of advising our clients. I’m sure that is why the room was packed with hundreds of local real estate agents. For the first time, I actually felt that a banker was giving relevant and useful information. The colleagues I pow-wowed with agreed. Apparently Mr. Vernon took his current position with BofA earlier this year and was quoted as saying:
“We know we need to improve processes and efficiencies in these areas. We have begun taking productive steps, and I look forward to working with real estate professionals, customers, investors and our team on ways we can accelerate that progress.”
I arrived after the presentation began; caught these important points:
Only DISTRESSED homeowner/borrowers will be considered for a short sale. Distress takes into account these 3 components: 1) credit; 2) delinquency of the mortgage; and 3) ability to repay with other assets. (He did not specify if all 3 are needed. I’ve heard conflicting messages about the current vs. delinquent issue.) Example: If you want to get a short sale approval on the vacation home in Vegas while the million dollar primary residence, the executive job, and other assets are intact, forget it.
Valuation. This area continues to be a challenge. A variety of techniques are being used, some based on investor requirements. He recommended having the marketing and pricing conversation early on. Some markets are very problematic. Outside appraisals will be considered.
Shadow inventory. He called it a “misnomer” and a misunderstood term. The reason he said this is because the bank cannot and will not hold ANY inventory if it can get to market. They have a duty to their investors to NOT hold this inventory. He feels the confusion, perpetuated by the media, by the way, happens when the grey area of “exhausting every opportunity” is taking place before the property goes on the market.
Deficiency judgments. These are being handled on a case-by-case basis. Some approvals will waive the deficiency and some approvals will be given with the deficiency judgment. If a seller does not agree to the approval with deficiency, then the loan will be foreclosed on.
“Approved” short sales in the MLS. These do not exist and should not be stated this way. Investors want to negotiate every offer as a new offer. Also, if any real estate agent is caught submitting a “straw buyer” offer to get the approval for a subsequent real buyer, they will not be doing business with BofA again, according to Mr. Vernon.
The process. We were told that the bank is getting caught up and that the processes are much more efficient than they were at the beginning of 2010. The 3 alternatives are 1) bring the loan current; 2) short sale or deed in lieu; or 3) foreclosure. That’s it. The emphasis is in “facilitating the pre-foreclosure alternative”.
He also said they are working on greater transparency. He has regular meetings with Fannie Mae and Freddie Mac every week, he wants to work with the real estate community to bring closure to this level of distress. One of his final comments is the “strategic default” group is very small. He also commented that for those who have had to stop making their monthly mortgage payments and have not yet received a Notice of Default, to expect the process to catch up soon.
Each of these topics really warrant their own post/topic. I just wanted to get the summary out to you right away.
I’d like to thank my Bank of America loan officer, Gordon Ling, for inviting me to this informative event. If you were at this event and want to add to this, please do. This was a Bank of America presentation so this should not be taken as applying to all lenders.
As always, please contact your legal, tax, finance and/or real estate professionals to address your personal situation.