A crowded room at the 5 Star Conference this week erupted as Gabriele Harrison announced that Fannie Mae will be using asset management companies to handle their companies short sale requests in the future. Fannie Mae, the single biggest player in the mortgage market, will be informing clients that they will need to work with asset management companies when “short selling” their property.

An asset management company acts as a middle man between the banks that own the mortgage and the client that is trying to short sale the property. Asset management companies are already big players in the Foreclosure market, but up until now have not worked with short sale properties. The change that Fannie Mae and Freddie Mac are making should have some positive effects. Because most major banks use them for their foreclosed on properties, making the shift to Short Sale homes should be fairly straightforward. Using one company for all short sales will also streamline the process and speed up the time it takes for a client to short sale their house.

However, the new process is not great news for everyone. Since the housing collapse in late 2006 real estate agents have struggled to stay afloat, many agents have turned to short sales and working with distressed properties to help them stay afloat during the down market. When Fannie and Freddie start working exclusively with the asset management companies they will essentially be cutting out these agents. Fannie and Freddie currently own roughly half of the mortgages in America, if other big banks follow the lead small real estate agents will be all but cut out of the picture.

Details on the short sale process are still to come. We have put in calls to Mrs. Harrison (Fannie Mae) and Mrs. Beckles (Freddie Mac) however they were both unavailable for comment. We will keep you up to date on all the new developments as they come. We are still doing research but thought this information was worth sharing even in its primitive state.

Unfortunately these days, this is neither unusual or unexpected…almost considered standard practice. Having put in an offer in on an REO (Real Estate Owned aka Bank Owned property) about three weeks ago, Troy Reeves finds himself in the same position, wondering the same thing. “Why do banks take so long to respond?” Troy and The Reeves Team are experienced real-estate-owned agents who have worked with small and large banks in getting responses to offers. So, while having lunch the other day, we brainstormed some ideas as to why the process length seems to vary:

1) The Asset Management Company (who has been hired by the bank to handle the sale of the property) has been given strict instructions to hold any offers for a minimum number of days.

2) The Asset Management Company has been instructed to hold all offers until a minimum number of offers have been received.

3) The Asset Management Company has been given strict instructions to hold all offers until the end of the month, end of the quarter or end of a fiscal year.

4) Sheer Volume – Consider the stacks of paperwork that one Asset Manager deals with and is responsible for processing; then consider the number of signatures (approvals) that may be required to advance the purchase process.

5) The offer has been approved by the Asset Management Company and then requires a secondary approval by the Investment Group (that purchased the loan previously). Take into consideration that this group may only meet once a month. If this is the case, an additional 30 days could be added on to the waiting period.

Perhaps just the sheer volume of foreclosed homes on the market is overwhelming. Certainly the banking industry could not have been prepared for this influx – even with advance notice. Is there a solution? The bank’s first solution was the moratorium. The period of time that the banks “held” off on putting any new properties on the market. What did this waiting period accomplish? If the intent was to slow down the fall of property values, perhaps it did help accomplish just that. While the prices are not exactly where they were before the 2005-2006 housing boom, at least we’re hopeful that the downward spiral has slowed. While it may be too soon to tell, for now, we’re all in this together … waiting.