What are Service Releases During a Hawaii Short Sale?

While our Kauai inventory continues to decrease, we still have a lot of short sales in contingent status. We also have homeowners that are underwater that may choose a short sale as a preferred options to foreclosure.

One of the newer challenges in the short sale space is the phenomenon of “service releases.” In other words, say Bank of America is sending you your bill and then you get a notice that your loan is being service released. Bank of America may not OWN your loan. Some other investor does. And B of A services over 2,000 investors. When your loan is service released, you will start getting a bill from the new servicer.

Bank of America has and will continue to release pools of loans. No loan is safe from a service release even if it is an already approved short sale. This seems to be even more interesting because the new servicer seems dependent on the location of the state the property is in.

Many Kauai B of A loans have gone to Bayview Loan Servicing and Nationstar. A large amount of the serviced released loans in the state of California seem to be going to Ocwen Loan Servicing while other states, such as Nevada, seem to be going to Green Tree Loan Servicing.

Can My Short Sale Approval Be Taken Away if My Loan is Sold?

If you are in the middle of a short sale transaction, there is still no guarantee that the loan won’t be service-released. Don’t be fooled that because your short sale has been approved that it won’t be sold; your loan servicing can be sold or “service released” and the approval will become invalid. The worst part is that most borrowers signed away their rights to allow their servicer to this in the original terms of the mortgage contract.

Approved short sales may still have a chance! In representing many of our clients we have had to escalate these types of files to the highest level escalation contacts to be able to request a service release postponement. If the request doesn’t go through and the transfer of the loan is imminent, if you had the deal in closing, it may be possible with the right contacts to get the deal reapproved or upheld quickly with the new servicer.

New Bank of America Policy

A new policy is taking effect which states that if a deal is not in closing/approved 14 days prior to the service release date, the file will be hard declined (closed out). This is to help minimize the amount of approved transactions getting transferred and the problems that have arisen since this started to happen.

If a service release occurs on a file, continuing the short sale almost always starts from scratch, but with the right contacts it sometimes can be avoided. Be aware, homeowners should receive notification of a pending service release in the mail. If you are going to pursue the purchase or sale of a potential short sale, it’s wise to work with an agent who has lots of experience in the ever changing eco-system or short sales and distressed properties.