A December 4 Bloomberg article on bank Short Sale approvals is another mainstream report documenting that Short Sales are becoming commonplace as a solution to the flood of bad loans on Lenders’ books.

In the past few weeks Wells Fargo, Freddie Mac, and other major players have started defining the terms that are acceptable for Short Sale flips, all practices that fall within the range of the methods I teach.  So, expect to see even more Short Sale activity in the coming months using the flip as the method of choice.

The Bloomberg article points out Lenders have not had structures in place to incentivize staff for making decisions about taking losses on property leading to major foot dragging among certain Lenders when it comes to accepting Short Sales. Lenders have also been reluctant to accept losses while second mortgage holders and other lien holders have been stubbornly holding out for their payments.  Now secondary lien holders are beginning to accept reality and settle for pennies on the dollar so that the Short Sales can be approved with greater overall reductions for Investors and their end Buyers.

Lenders also have been working on software to track Short Sales more effectively and they are adding staff, both components necessary to deal with the flood of foreclosures in the current and expected pipeline over the next few years.

JP Morgan has doubled the number of officers trained to handle Short Sales, adding 5,000 people just since January 1, 2009.  As of October 2009 Bank of America had established a “cooperative short sales” program, and has also added staff to handle the flood of applications both for loan modification and Short Sale.  Over all, according to Laurie S. Goodman of Amherst Securities Group, Short Sales save between 10 and 15% for Lenders compared to foreclosure.  Both are significant losses for Lenders, but the Short Sale is less of one.

New Treasury guidelines set to go into effect April 5 will require Lenders to consider homeowners for Short Sale within 30 days after missing two monthly payments.  While there are things about the new government program we do not like, getting Lenders to make decisions quickly about the appropriateness of a Short Sale is a good thing and may increase the numbers of Homeowners who are helped.