The Distressed Property Coalition is two for two! For the first time in the history of modern real estate investing, a few committed leaders have worked within the system to fundamentally change the federal rules and policy governing the sale of distressed real estate. From 2008 to the present, depending upon what market you are in and what sources you refer to, 20%-40% of all sales of existing homes have been short sales. All of us would agree that short sales have become a significant component to the residential real estate market since 2008. Short sales have also become an area of great difficulty, constant change and confusion. It was taking longer and longer for banks to make a decision on short sales.
The Federal Housing Finance Agency (FHFA) listened to the Distressed Property Coalition, and earlier this spring, they changed the timelines by which servicers and lenders must respond to and process short sales. Last year, the Florida Association of Realtors, in conjunction with the National Association of Realtors, asked Congressman Rooney from the State of Florida to introduce legislation that would have required servicers and lenders to give a response to short sales within 30-45 days. The Distressed Property Coalition was invited by Congressman Rooney’s office to give input on that bill. We gladly did so.
Earlier this spring, FHFA incorporated that proposed bill into a larger decision that sets forth a number of new timeframes for short-sale processing, the acknowledgement of receipt of a short-sale package, and decision making by servicers and lenders. However, knowing how Washington works and that the FHFA, not Congress, would have the final decision on this issue, DPC referred the proposal to the FHFA and voiced its support to expedite relief for short-sale investors. This is a very strong example of clear leadership being displayed by the Distressed Property Coalition in changing the way real estate is being bought, sold and regulated in the United States of America.
Earlier this week, the FHFA appropriately stopped Freddie Mac from being the judge, jury, prosecutor and executioner of various investors, agents and title companies. A critical issue for distressed property professionals has been the arbitrary blacklisting going on at Fannie and Freddie. Freddie Mac was blacklisting various investors, real estate agents, brokerages, title companies, etc., if Freddie Mac didn’t like how they participated in fully-disclosed short-sale transactions. Freddie Mac would blacklist that person or company, believing that they presented a risk of undue loss to Freddie Mac and to the U.S. taxpayer. There was no due process, and there was no real fraud prevention or risk control imposed by Freddie Mac’s arbitrary policy.
The FHFA listened to the DPC, and as part of its emerging fraud prevention program, it has taken that unilateral power away from Freddie Mac. DPC argued before FHFA that Freddie and Fannie had no business making these decisions without a proper appeals process because they were, in fact, quasi-governmental agencies since the conservatorship began. Also, this blacklisting threatened all of the other wins that the DPC believes that we can obtain in the future because Freddie Mac and Fannie Mae could simply blacklist the bulk of investors who seek to do certain types of distressed property transactions.
The FHFA ruled earlier this week that it will now control the list of individuals prohibited from doing business with Fannie Mae and Freddie Mac, and a proper appeals process will be put into place. This process begins on August 15, 2012. This is a win for serious and well-thought-out fraud prevention, as well as for investors being unfairly treated by Fannie Mae and Freddie Mac.
These successes by DPC are continuing to make it easier for well-trained professionals to buy and sell distressed real estate. The DPC expects further rulings from the FHFA on resale valuations and flipping policy very soon.
