1sts - Short Sale file handling runs about the industry average of 60 days +/-.  Normally not flexible when homeowner hardship is unique.  Operates very much like the big bank they are - cumbersome policies that are slow to change.
2nds - Bank of America continues to present the most difficult challenges in the servicing industry on Short Sale proposals, on home equity 2nds.  Our experience is that it takes a cash contribution from the homeowner of 80 cents on the dollar, or 10 cents+/- on the dollar cash and a note for the balance of the deficiency to get BofA to approve a Short Sale on a HELOC.  BofA does not seem to respond favorably to documentation demonstrating the borrowers inability to meet the contribution demands.
Update - Since the Countrywide integration, Bank of America has become absolutely inflexible on the continuing liability for deficiency issue when authoring short sale approval letters. California borrowers, who are legally entitled to anti-deficiency protection, are forced to accept liability for the deficiency on first and second mortgages as a condition of BofA short sale approval. While this is not a new issue, the fact that there is virtually not room for flexibility is new. Irrespective of the severity of the hardship, the troubled borrower is forced to either accept the liability or surrender to foreclosure.

1sts - Citi is pretty reasonable on 1sts, once you figure out who to talk to. If you get a good contact at Citi, save the number. We have success at times when we direct a file to a negotiator we have had success with previously.
2nds - Citi has been moving files into the “Recovery” department pretty aggressively - no one has shared their policy with us, but it seems that at about 90 to 120 days late the 2nds go to a department that is darn tough to please. Once in the Recovery department, it will take a bigger contribution from the homeowner most times, even on non-recourse debt. Even with a 10 cents on the dollar contribution, it sometimes takes an agreement to a soft note to get an approval. Bottomline, move fast on Citi 2nds if you can.
Update - CitiMortgage has a new form approval letter containing the following: CitiMortgage, Inc. reserves the right to revoke the short sale authorization until the certified funds and final HUD 1 settlement statement is received and reviewed. In other words, they reserve the right to unwind your deal – that would be after the buyer, with a policy of title insurance in hand, already owns it. Getting a short sale closed on an approval letter that includes this clause requires an extensive and entirely silly work-around by the agents and the escrow agent.

Note: On December 22nd Downey Savings was acquired by US Bancorp. US Bank is an super regional bank with very little exposure to the mortgage default problem. It remains top be seen how they will put their stamp on Downey asset management operations. Will keep you informed as the situation develops

Except on a very small portion of their servicing portfolio, Downey will no longer work on short sales.  If it is Downney paper they appear to be willing to do a short sale and are actually very responsive.  DO NOT assume that a Downey Savings mortgage is a no go - Call Downey, or have your client call Downey, and ask if they will work on a short sale on the loan before you surrender on a good short sale opportunity.

Update: Watch them operate and it’s no wonder they are where they are. I just would have expected U.S. Bank to bring their strong operational expertise to the table by now.  Had a short sale ready to close last week in Southern California that would have generated $600,000 in net proceeds. Downey just said no. No particular reason, just no. This stuff is too crazy to make up. So, Downey really showed that seller. Downey sold it to a third party bidder at the steps three days later for $445,000. Do the math on that one.

First Horizon usually has a negotiator assigned within 15 days and a preliminary response within 45 days. We have, however, had a few experiences with First Horizon that have involved more time and effort to get action on a file. Sometimes, and this happens with a few lenders, it just seems that occasional files get turned over to negotiators who sit in rooms with no windows, and have no interest in pushing files forward.

1sts - You can usually get someone to talk to. Experiences seem to be uneven - some o.k., many not so o.k. Not fast movers, budget over two months for an approval.

2nds - For some reason HSBC uses Century Credit to collect documents on junior liens - then Century Credit starts calling for file updates. Go figure. Watch out for the HSBC recovery department after a “charge off.” Not very nice overall on 2nds. Frequently takes the position that if the homeowner doesn’t give a pound of flesh they are going to punish them with a foreclosure.

1sts - We don’t run into a lot of National City 1sts. Those we have handled have gone well. I think that is because National City saves all their unpleasantness for those who ask for help on a 2nd.

2nds - Just plain not nice most of the time. National City speaks of the cross training of their staff (collection and loss mitigation), well I can tell you which side it feels like most come from. Working with National City is frequently a reminder why it’s nearly never a good idea to speak with anyone’s collection department. You will want to prepare yourself for a real battle to get a fair result for your client. Always be polite and respectful, but with National City you will need to be tough as well. In the end National City demands 10% cash recovery on 2nds, regardless of your circumstances. No ideas on where to go get the money, they just want it. For example, on a purchase money 2nd with a pre-bankruptcy balance of $67,700. The 1st, Countrywide, approves the Short Sale and we are able to get $3,000 on the table for NC - for a debt that has been fully discharged through bankruptcy. NC says no, we need a 10% ($6,770) recovery offer, or they won’t even look at the file.

Although not really a “lender” mortgage insurance (MI) companies like Old Republic may have a stake in the Short Sale at least on covered loans. We are talking, in most cases, about MI coverage that was purchased, or paid for, by the beneficiary (lender) - we are not talking about traditional borrower paid mortgage insurance. Old Republic generally demands 20% of the oustanding lien (usually it’s the junior lien) from the borrower. On occasion, we have been able to satisfy Old Republic with an unsecured note. It gets difficult when the demand for recovery is on a purchase money obligation. Because, the borrower would likely have no obligation for the debt after the foreclosure, at least in CA.

Unreasonable is the only way to describe most demands made by mortgage insurance companies when their cooperation is being requested to get a Short Sale closed. We continue to have more than occasional success when we attack the challenge head-on. It is time consuming. Particularly in those cases where the debt in non-recourse, you can be successful when battling with MI companies, including Radian. Just make sure you start early and have a big cup of coffee.

Specialized has been one of our favorites, making common sense decisions that maximize capital recovery &emdash; until some new people and a new attitude. We are seeing foolish responses on purchase money 2nds where they face a total loss if the 1st forecloses, even with reasonable offers from senior lien holders. They claim that their recovery department can squeeze money out of somewhere after they are wiped out. Dare I ask where? The tooth fairy? Unnecessary foreclosures hurt everyone. Come on Specialized, you are better than that.

Update - For the second time in the last few months it has been brought to us that WaMu has sold 2nd mortgage notes after a Short Sale has closed. In both cases (we fear there have been many others) the approval letters included provisions that said the seller was to contribute ZERO at closing, and no mention is made of WaMu reserving the right to pursue collection after close.  We have reached out to WaMu management and suggested that what occurred was an “administrative error.”  They have been given a graceful way out - instead, WaMu has gone silent.  In the meantime, collectors are going after the Short Sale sellers, non-stop. We will continue to appeal to WaMu management, and will keep you informed.

From the very beginning of this cycle, going back to 2006, Washington Mutual has presented unique challenges for those trying to get Short Sales approved.  We have encountered some very good people there along the way, but they seem to be handcuffed by challenges caused by understaffing and transaction-unfriendly policies. The acqusition by JPMorgan Chase may eventually improve WaMu’s performance, but that assumes that a serious culture conflict is avoided. For now, it frequently takes WaMu five to six weeks just to assign a negotiator to a file. A bit of good news, you will start to make progress quickly once you have a negotiator. We are bumping into many WaMu files where we are being told the total commission will be capped at 3%. In almost every case, it was not truely a policy, but an overly aggressive negotiator. What a waste of everyone’s time - and every day wasted means a bigger loss for the beneficiary.