Recent C.A.R. Lender Satisfaction Survey finds mixed results; incremental improvements in some areas, poorer marks in others
LOS ANGELES (Oct. 18) – Lenders have made incremental improvements in closing short sale transactions since last summer, but still have a long way to go, according to findings from the latest Lender Satisfaction Survey conducted by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
Since the survey began in 2010, lenders have made some progress in their short sale processes, with 64 percent of California REALTORS® expressing difficulty in closing short sales, down from 77 percent in August 2011 and 70 percent in 2010, according to the C.A.R. survey. The survey gauges REALTORS®’ experience working with lenders in their most recent short sale transaction – a transaction in which a homeowner with a demonstrated hardship negotiates with the lender or lenders to accept less than the balance owed on the mortgage.
The most noticeable improvement came from the REALTORS® who reported short sales as “extremely difficult,” dropping from 56 percent in 2011 to 34 percent in 2012.
“While it’s encouraging that lenders and servicers are making headway in improving their short sale processes, they still have more work to do to ensure that not only REALTORS®, but also home sellers and buyers have a better experience when dealing with short sales,” said C.A.R. President LeFrancis Arnold.
“A recent change announced by the Federal Housing Finance Agency (FHFA) to align Fannie Mae and Freddie Mac short sale guidelines will allow lenders and servicers to quickly and more easily qualify borrowers for a short sale, further improving the process,” said Arnold. “C.A.R. has long advocated for a standardized short sale process, and agreeing to a more standardized process may be the best way for banks, servicers, REALTORS®, and homeowners to facilitate the sale of homes that qualify.”
Communication issues continued to be the main source of REALTORS®’ short sale transaction difficulties. Communication issues included lenders’ slow response time to a short sale package (cited by 67 percent of REALTORS® in 2012, up slightly from 66 percent in 2011), poor communication with lender representatives (cited by 55 percent of REALTORS® in 2012, unchanged from 2011) and repeated requests for documentation (cited by 50 percent of REALTORS®, down from 51 percent in 2011). Eight percent of REALTORS® reported that the lender foreclosed on the home before the short sale transaction could be completed, down from 15 percent in 2011.
Overall satisfaction in working with lenders in short sales improved over the past year, with 59 percent expressing dissatisfaction, down from 75 percent in 2011. Additionally, more than six in ten REALTORS® said they would not refer buyers to the lender for future home purchases, down from 78 percent in 2011.
“With short sales being a better option than foreclosure for both struggling homeowners and lenders, it’s important that lenders continue to improve their processes so that losses incurred by homeowners, lenders, and taxpayers are limited,” Arnold said.
Also included in the survey is C.A.R.’s newly developed Lender Performance Index (LPI), which measures REALTORS®’ lender satisfaction levels. The Index rose to 23 in 2012, up from 17 in 2011 and 16 in 2010. While the increase in the LPI is positive, the Index is still far below the median of 50, indicating there is still room for lenders to make improvements in their communications and processes.
C.A.R. began conducting its Lender Satisfaction Survey in 2010 in an effort to gauge REALTORS®’ experience in working with lenders or servicers during their most recent transaction, most of which were short sales. The most recent survey was conducted in June 2012.
Lender Performance Index Methodology
The Lender Performance Index (LPI) is a diffusion index based on several survey questions from the Lender Satisfaction Survey. Each question taken from the survey essentially creates separate indices from which a weighted average is calculated. This figure results in the LPI, which ranges in value between 0 and 100. A value of 50 is considered a median value. Any index value above 75 is considered high, and any value below 25 is considered low.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.