Lenders have made some improvement in the eyes of California real estate agents in their handling of short sales, but the process remains problematic according to the California Association of Realtors® (C.A.R.) The industry group just released results of its third annual survey on short sales and found 64 percent of its members have had difficulty closing these sales with 34 percent describing the difficulty as "extreme." A short sale is one where the lender agrees to release its lien in return for a payoff less than the actual balance of the mortgage.
When C.A.R. first conducted the survey in 2010, 70 percent of respondents said they had experienced difficulty with their most recent short sale transaction. That number rose to 77 percent in 2011 with 56 percent ranking the difficulty as extreme. Nineteen percent described their most recent transaction as easy or extremely easy, up from eleven percent last year
Lender response time to the short sale package and communication with the lender, the two problems most often cited by Realtors, each ticked up slightly to 67 percent and 55 percent respectively. Problems with appraisals and dual track issues where the lender foreclosed in the midst of the short sale negotiations were named as areas showing the greatest relative improvement.
"While it's encouraging that lenders and servicers are making headway in improving their short sale processes, they still have more work to do to ensure that not only Realtors, but also home sellers and buyers have a better experience when dealing with short sales," said C.A.R. President LeFrancis Arnold.
Overall satisfaction in working with lenders in short sales improved over the past year, with 59 percent expressing dissatisfaction, down from 75 percent in 2011. Additionally, more than six in ten Realtors said they would not refer buyers to the lender for future home purchases, down from 78 percent in 2011.
"A recent change announced by the Federal Housing Finance Agency (FHFA) to align Fannie Mae and Freddie Mac short sale guidelines will allow lenders and servicers to quickly and more easily qualify borrowers for a short sale, further improving the process," said Arnold. "C.A.R. has long advocated for a standardized short sale process, and agreeing to a more standardized process may be the best way for banks, servicers, REALTORS®, and homeowners to facilitate the sale of homes that qualify."
C.A.R. also includes a new Lender Performance Index (LPI) which measures Realtor satisfaction with lenders. The LPI has risen steadily over its three year history, but C.A.R. notes it is far below the median of 50, "indicating there is still room for lenders to make improvements in their communications and processes." The trade group says it considers any index value above 75 as high and below 24 as low.
