Another Year of the Short Sale

January 6, 2011: The Treasury Department set a new standard for short sales in 2010 when it launched the Home Affordable Foreclosure Alternatives program. But short sales were lower than expected last year with HAFA generating fewer than 700.

But the Treasury recently revamped HAFA guidelines, and the industry is starting to ramp up operations. John Vella, the chief operating officer at technology provider Equator, sat down for this edition of In This Corner to explain just why he thinks 2011 will be the year of the short sale.

Q: With so many initiated transactions on the platform, will 2011 be the year of the short sale?

John Vella: With one in five borrowers underwater on their home and an estimated 1.5 million foreclosures scheduled for 2011, the opportunity for short sales will be better than ever. Investors usually see a 20% to 30% better execution on a short sale versus an REO sale when it comes to loss severity. With the foreclosure volume, current and pending REO inventories, servicers will be pressed to do more short sales in 2011.

Servicers are more equipped and skilled than ever in the short sale process which will allow them to convert failed loan modifications and potential failures into short sales. The short sale process, real estate agents’ capabilities and technology have evolved, making for a more mature relationship between the borrower, lender and agent. If the servicers are properly staffed and using proven short sales technology, in 2011 they could see an increase of at least 25% over 2010 in completed short sales claim Housing Wire.

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