Foreclosure Update:
Is the Shortsale on the Way Out?
5.19.08
By: Stephen J. Nash
Nash & Lodge, PLLP
nash@nashandlodge.com
There are many misunderstandings when it comes to foreclosures. People confuse what lenders have voluntarily
done with what they are required to do. This can lead to horrible surprises for the real estate professional and their
clients.
Over the
last two years as the credit market has been turned upside down and the numbers of foreclosures keep on rising, lenders have
consistently shifted gears when dealing with foreclosures. In the beginning of the real estate fall, it was impossible
to find someone on behalf of a lender who understood what a shortsale was much less someone who had the authority to actually
authorize one. Then it became ridiculously easy to get a shortsale approved. As the real estate decline continued
the lenders have consistently made it a more difficult and time consuming process to obtain approval of a shortsale and then
began approving shortsales with a release of the mortgage but not of the debt.
We may now be looking at another shift in what lenders may or may
not do that will have tremendous impact on sellers and buyers of property that is in the foreclosure process.
In the past week we have heard from two
clients that their sellers’ lender refused to even consider a shortsale and indicated that they will not approve any
shortsales during the period of redemption. The lenders were Wells Fargo and Countrywide. In
one case a letter from a representative of the lender was forwarded to me setting out this position.
Whenever you come across information like this you have to be careful
as to how you react to it. These are huge companies with thousands of employees who are not always on the
same page. These companies switch positions continually depending on the feedback they receive on the new
policy, political and economic pressures. These companies are also dealing with different laws and rules
in each state that sometimes cause confusion. While we generally have a 6 month redemption period in Minnesota
some states such as Florida have no redemption period. As a result, sometimes the initial policy is not
correctly applied in the case of Minnesota property because they do not fully understand our foreclosure process.
Only time will tell as to whether these
companies truly will not approve a shortsale during the redemption period. If it is true, the other lenders
will almost certainly follow their lead and our market is going to significantly change.
I would be interested in your recent experiences with lenders.
Are they approving your shortsale requests during the period of redemption or not? Please specify
which lender you are dealing with. I will pass on the information that I receive so as to keep you better
informed as to what is happening in the marketplace.
NOTICE
The foregoing is not intended to constitute legal advice for any specific circumstance,
but is intended to reflect broadly applicable principles, under Minnesota law, relevant to a typical situation. Each set of
facts and each contract are, or can be unique; the unique facts and specific language of the contract may require a different
legal analysis and may result in a different outcome. Before proceeding in reliance upon this or any other general description
of law, consult with an attorney competent in the field of practice relevant to your situation.
Copyright
2008 Nash & Lodge, PLLP
