Short Sale Processing and the Investor

A few years back, I had a lunch meeting with the manager of a chain of real estate offices and he said something to me that I still remember. He said, “I love this word escalate. With short sales, it takes on a whole new meaning.” And, he was right. It does.

I would bet dollars to donuts that half of the bank employees who currently use the word escalate to address the status of a short sale files were not using that word a few years back. The word escalate, of course, refers to taking it up a notch. In the wacky world of short sales, when you escalate something, you ask that it be addressed by a supervisor, a manager, a vice president, or even the CEO.

There’s another word that also takes on a whole new meaning when processing short sales. That’s the word investor. The investor is generally the company or individual who owns the note on a property. For example, at Chase or GMAC, you may be told that the investor does not approve closing cost credits or the investor needs to sign off on the file.

Here’s what that means: it means that this institution is a servicing organization or mortgage servicer. The mortgage servicer has an arrangement with the investor to provide mortgage servicing (i.e., to collect mortgage payments).

There are times when agents have told me to make sure the bank knows about the termite damage or the hole in the roof in order to assure that the short sale decision takes this information into account. And, it is a good idea to let the institution know about these problems and even provide photos and repair bids. However, if the company is a mortgage servicing organization, that very same information is then conveyed from the servicer to the investor. And, that communication can sometimes get a bit muddy.

Fannie Mae and Freddie Mac are investors. Major servicers throughout the nation service loans for Fannie Mae and Freddie Mac. In addition to these two, there are also many private investors whose guidelines and decision-making philosophies are more guarded.

I heard on the news the other day that the word friend is now going to appear in the dictionary as a verb. Thanks to facebook, people can now friend each other. As society changes, so does our language. Words such as escalate and investor have taken on new meanings as a result of changes to the economy and the real estate market.