If a homeowner is “underwater” on the mortgage, meaning that the fair market value of the house does not equal the amount owed on the loan note, then the homeowner cannot sell the house through traditional means. A traditional sale recoups sufficient funds to pay off the amount owed to the homeowner’s mortgage company or companies and hopefully make a little extra. In order to sell an underwater home, a homeowner must conduct a “short sale.” In a short sale, the homeowner attempts to obtain the mortgage company’s approval to sell the house for less than the amount owed on the note. The mortgage company must agree to release the lien on the deed in order for the buyer to purchase the house free and clear of the homeowner’s mortgage loan.
By way of illustration, if the homeowner owes the bank $200,000 on the note and can only sell the house for $100,000, the homeowner must seek approval of a short sale. The mortgage company must agree to release the lien on the deed for $200,000, or they buyer won’t purchase the house. Next, the homeowner will want to convince the lender to waive the $100,000 still owed on the note, called the “deficiency” on the note. Under Nevada law, for home sales made before 2009, a homeowner’s assets are liable in court to be seized in order to pay back the bank the deficiency amount. Those homeowner assets include property, savings and income. Short sales take a long time to complete. If there are two loan on a home, it normally takes longer. The banks average between four to six months to complete a short sale. It is part of the mortgage company’s normal processes to confirm that the buyer can afford to buy the house before proceeding to closing. The mortgage company will want proof that the buyer is prequalified to buy the property or proof of funds if the buyer intends to pay cash.
Nationstar Mortgage is imposing a new requirement on the buyer, one we are seeing for the first time. In order to obtain approval from Nationstar to conduct a short sale, the application states that “all Buyers requesting a “Short Sale” on a Nationstar property must submit an application for Loan Approval through Nationstar Mortgage before an offer can be accepted on a property. Applicants are not required to use Nationstar to fund their loan. They buyer, however, does have to submit an application to confirm that they qualify for a loan and are in good credit standing.
Several buyers have already objected to the NationStar requirement. They stated that they have no business relationship with NationStar and do not want to share all their financial information with them, especially since they have their own mortgage lender. Some are refusing to participate and simply making offers on different properties.
Some buyers object to giving away all their financial information to a company they have no business with. Nationstar says that the buyer does not have to use Nationstar to fund the loan. So what is the problem if buyers can use their own lender? Well, sometimes they can’t use their own lender.
The Nationstar application also states that “in the event that an outside lender is unable to close a loan by the scheduled deadline, an extension will be granted only if Nationstar Mortgage assumes the loan process so that we can be assured that the transaction will be closed in a timely manner.”
Remember, short sales can take four to six months. That delay is completely within the control of the homeowner’s mortgage company. It is the homeowners’ loan holders that routinely cause delays in short sales, by taking too long to consider the application that they buyer’s withdraw their offers, losing documents, requesting new documents after the previously submitted documents have “expired” and constantly requiring submissions of new pay stubs, new bank statements and the like. When they finally approve a short sale and agree to release the lien, the lenders routinely set unrealistically short deadlines to close escrow, forcing homeowner’s to request extensions in most instances.
This requirement has the potential to force buyers to drop their own mortgage company and take out a loan from Nationstar in order to close the deal. There is something about that idea that, so far, has caused several buyers to say “forget it” and drop the short sale. As buyer’s object to this requirement, it has the potential to delay or kill short sales of properties with NationStar mortgages. If it catches on to other lenders, it could make the already frustrating short sale process even harder to complete.
5 Responses
and in the case of a cash buyer? Why would they be required to provide financial information other than proof of funds? Nationstar has already made this requirement with a cash buyer I have… doesn’t seem to be any logic there.
I will take it a step further. I have a scenario whereby Nationstar is the sellers short sale lender and is making the requirement of the buyer to apply with them. BUT here is the difference. The buyers lender has a wholesale relationship with Nationstar and has uploaded the file into Nationstar underwriting system which intern has issued an automated appoval recommendation from Nationstar. NOW – it is NOT enough that the complete loan application is in their system along with the credit report AND that we provided the short sale department with an approval issued BY THEM (Nationstar)…but they will not release the short sale approval uness the buyer submites the loan application through what appears to be their retail arm. Therefore the excuss that they give about wanting to make sure the buyer is qualified does not hold water; rather it appears they are trying to drum up retail business.
Milton has it right. They are trying to play all the angles here. Drum up business for their retail division then retain servicing and sell the new loan to themselves. Somewhere in this mix behind the curtain, they will approach the Federal Government, FDIC to help them make up their short fall on the short sale if any? Why would the FDIC be involved? Some more back door behind the curtain shenanigans with tax payer money all sanctioned by the FED. In the words of Col Kurtz (Apocalypse Now) “We must kill them…..”
I admit it is genius just like Bernie Madoff
she·nan·i·gans/SHəˈnanəgənz/Noun
1. Secret or dishonest activity or maneuvering.
The investors that actually own these loans should put a stop to this. Very qualified buyers (cash and otherwise) will walk from these transactions rather than disclose personal information to an institution they have no relationship with. Nationstar is harming the very clients they are claiming to protect, the investor’s they service. By scaring away very real buyers they are causing distressed inventory to remain on the market longer, hurting neighborhoods – and yes, I will say it – they are slowing down the housing recovery. Very Bad Form Nationstar. Do you realize your name is being equated with greed and poor form in the real estate industry? #ReallyBadPR
Nationstar has been jerking me around for three months. Wouldn’t even say yes or no to my bid until last week. Yes I had to not only pre qualify but do the whole loan process. Then, they said get your money from your tax shelter and have it ready , I said not really, not until you accept my offer. Well, they didn’t. They said the investors want xxxxx amount, ( which even the seller’s realtor said was rediculous) There are houses on the block with views, pools, larger and all redone to flip and that is what Nationstar wants for the one I am involved with, that has none of those things. They see how much you have from all of the loan information you give, then they try to bleed you dry…won’t happen here! And, yes, I was told that if I didn’t let them give all of my private information to them to distribute however they want, they wouldn’t do the deal. Many, many bad comments about them online,