FANNIE MAE ANNOUNCES NO NEGOTIATION OF PREFORECLOSURE SALES COMMISSIONS

Effective March 1, 2009, the approval and closing of short sales will not be conditioned on the willingness of the listing firm to alter its fee arrangement with the borrower, as long as the total commission does not exceed 6%.

No Negotiation of Pre-foreclosure Sales Commission

Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers
Effective March 1, 2009, closing of pre-foreclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in the aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with pre-foreclosure sales.

Fannie Mae Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers

For more information go to:

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0903.pdf

Unfortunately, this regulation only applies to Fannie Mae backed mortgages and is great as long as there is no opposed second mortgagee (as a lot of the times they are the ones asking for a reduction in commission in order to increase their net proceeds). Also, agents and brokers must keep in mind that even though a six percent commission could be negotiated and agreed upon by the listing agent and the seller, this does not mean it would be guaranteed. Keep in mind the majority of homeowners needing a short-sale are in total financial peril and will be relying on their mortgage company to pay for all expenses normally deemed the seller’s responsibility (due to the homeowner’s inability to cover such costs). This means distressed homeowners will more than likely not be able to pay your total commission rate should it fall short of the agreed upon percentage for any reason. Listing agents and brokers should always play it safe by stipulating all short-sale listings as a “Variable Rate Commission”.

Short-sales are no walk in the park. They can be very involved and time consuming and carry with them many potential legal pitfalls to those who are not familiar with negotiating such deals or are not familiar with foreclosure law, etc. My firm has incurred countless hours and carried substantial financial burden only to have lost money on more than one occasion by representing financially distressed homeowners facing possible foreclosure. Trust me, no one likes loosing money! That’s not why we are in business for. However, this is a known risk that we agree to take on when representing a homeowner in financial hardship. We are not obligated to take on such clients, but rather choose to do so knowing the risks. We also do it because helping people is what we do and love.

When we accept such a client, there is a heightened “fiduciary responsibility” we must all adhere to. Please check my latest entry I have posted today on the Massachusetts Foreclosure Prevention Group link located here on Facebook titled “Negotiating Your Own Short-Sales? Hope You Have A Good Lawyer!” The purpose of this entry is not to scare, but rather make real estate professionals taking on financially distressed homeowners aware of their “fiduciary responsibility” if they choose to work with such a homeowner.