Boosting "Workout" Incentives

August 14, 2008
"Workout" incentives in this post is about loan servicers, not about shaping up your body!
This week Fannie Mae followed Freddie Mac's lead in boosting incentives for loan servicers who work with borrowers to help them avoid foreclosure, including repayment plans, loan modifications, short sales and deed-in-lieu of foreclosure. These incentives for the loan servicers will apply to loans in which Fannie Mae assumes the risk of loss and in which the workouts are completed on or after August 11, 2008. These incentives are cash incentives paid to the loan servicers.
For borrowers, sellers, buyers, and agents the hope is that these incentives will motivate servicers to be more timely in their responses. Most of the time, short sales are taking 4 months or more to get approvals. By that time buyers often decide not to make the purchase and the lender has lost months more of payment income. Many prospective buyers will not even look at a property that is listed as a short sale due to the long waiting period before they know whether or not the sale will be approved.
It will be a wonderful thing if loan servicers streamline their processing and properties can be saved for the existing borrower or sold in a timely manner.