Last Friday the Minnesota Association of Realtors® (“MNAR”) released a member update identifying that there has been some recent disruption in the short sale process (where lenders/servicers are sometimes refusing to allow a short sale after the sheriff’s sale has taken place). This is apparently due, in large part, to reaction by lenders/servicers to a recent (March 13th) Freddie Mac bulletin.
This bulletin (Freddie Mac Bulletin 2012-7) identified a revised definition for the term “REO Rollback”. Additionally, it changed the calculation and fee structure for various workout or modification programs, changed fees and costs for researching/reconstructing servicer records, and made other changes that may impact how servicers approach mortgage modification or workout arrangements. According to the MNAR update, a few days after the Bulletin was published, mortgage servicers began notifying homeowners who were past the sheriff’s sale that the investor would no longer approve short sales during redemption, and that the homeowner should contact Freddie Mac.
So, for those who were planning to accomplish a short sale during the redemption period, after sheriff’s sale, that option may be much more limited.
Exploring Options – Seek Legal Advice
For those who are exploring options in advance of foreclosure, you should speak with an attorney experienced in real estate transactions and distressed property scenarios. Scenarios such as foreclosure postponement (a process detailed in Minnesota Statute §580.07) may be well worth exploring. While it is important to seek the advice of a competent attorney to ensure you are not making a decision that creates more risk/problems than benefit, some homeowners in distress do not believe they can afford to do so. Such individuals may wish to seek out attorneys who may offer a limited scope review or advising at a contained cost.
Exploring Options – Consult Other Resources
Since many foreclosure and short sale related scenarios have significant financial, credit, or tax consequences, exploring scenarios with your financial advisor, tax, advisor, real estate agent and other professionals is also important. For those who want to make better use of their time with an attorney or who are looking for additional or independent resources while considering options in connection with mortgage foreclosure or distressed property, you may also wish to explore the Minnesota Home Ownership Center’s website. The MN Home Ownership Center (HOCMN) such as the following:
- the “Know your Options” summary guide, found here
- an overview of foreclosure postponement by a mortgagee (borrower) and an online tool to help with the process, found here
- a summary of common scams and warning signs for those who prey upon individuals in financial distress, found here.
This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck. Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law. Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters. He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.