Sep 12, 2012

Tip 36-2012: Why do Short Sale Lenders Continue to Foreclosure while Negotiating a Contract (Part 1)

Dual Tracking with short sales is a concept that has, unfortunately, been part of the short sale landscape from the very beginning. This lender practice is what is commonly referred to as "the left hand not knowing what the right hand is doing". In other words, the collection side of the bank is pursuing a foreclosure, while the loss mitigation department is negotiating a short sale.

You would think by now that the short sale lenders would have their act together. Unfortunately this is not true, it has actually gotten worst. Our Short Sale Paralegals have to stop ten to fifteen foreclosures a month while at the same time continuing to negotiate the short sale contract.

In a state like Virginia, it makes no sense to spend thousands of dollars to start a foreclosure only to stop it within the last week in order to continue the short sale negotiation. California has recently passed legislation to stop this practice of "dual tracking". Unfortunately the California law is limited in its applicability: (1) the short sale has to be approved in writing, (2) proof of funds or financing must be provided and (3) it only applies to owner occupied residential loans. This law is not perfect, but it's a start.

"Where are our Virginia Legislators?"

Next week's Tip will continue to discuss this practice of "Dual Tracking".

William D. Tucker, III
Tucker Griffin Barnes  P.C.
Charlottesville, VA (434-973-7474)

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