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have the assignment of the note chain match the assignment of the mortgage chain. Though this verification isn't currently required in all jurisdictions, it's a good idea for lenders to take this step to prevent potential delays in the future. If the chains are broken, then having a process in place to repair them in a timely manner is essential. Compliance Issues Missing or improper documentation may not only delay or halt a short sale, but it can also leave the lender vulnerable to compliance or even legal problems. With myriad regulations and other compli- ance matters facing the marketplace today, lenders and servicers must take every measure to stay on top of documentation issues. Missing or improperly executed documents give regulators good reason to look into a lender's shop. That alone calls for lenders to make sure all paper- work is in order, whether performed in-house or through an outside company. When loans are paid, servicers have a finite period of time to release the liens, and that window varies from state to state, ranging from 30 days to upwards of 90 days. It is critical to have a process in place that releases the lien within the time frames stipulated by each juris- diction. Improperly performing and document- ing a lien release leaves lien holders vulnerable to litigation. A Question of Value Missing or faulty documentation can also reduce the value of mortgage assets lenders or servicers try to unload. Potential investors don't want to go through the difficult process of cleaning up the title chain so they can ultimate- ly transfer the property to a new buyer, costing them both time and money. Having proof of clear title simplifies the process for all parties involved and increases the value of the asset or an entire portfolio of assets. As the country works to move beyond the current housing crisis, smoothing the way for more short sales to take place is in everyone's best interest. Making sure all the documents are in place and properly executed goes a long way toward achieving a successful short sale, which helps not only the lender or investor, but also the distressed homeowner, the new buyer of the property and the housing market as a whole. Mike Wileman is president and CEO of Orion Financial Group, which specializes in mortgage assignments, lien releases, and document retrieval. Wileman has more than 25 years' experience in the mortgage industry. 62 RealtyTrac VP Daren Blomquist Talks Short Sales DS News recently caught up with RealtyTrac VP Daren Blomquist, and the discussion turned to short sales. Although data show this foreclosure alternative is more widely used, anecdotal evidence points to frustration and difficulty for those pursuing a short sale. So we decided to have a conversation with the RealtyTrac exec about the obstacles that get in the way of short sales, what can be done, and what trends to look for in the months ahead. when trying to buy a home through a short sale? Blomquist: The length of time it takes DS: What are the biggest issues investors face to close a short sale has for a long time been a stumbling block, and we're still showing that it's taking a long time to close on a short sale. RealtyTrac looks at the time a property starts the foreclosure process to when it sells, and as of the second quarter of 2012, that's an average of 319 days nationwide, which is the highest we've seen it since RealtyTrac [started tracking] the metric in the first quarter of 2007. The time it takes to close the transaction turns a lot of investors off. Investors also favor either buying at the foreclosure sale or buying once the property becomes an REO. I think another reason why investors are turned off is the competition from other buyers for short sales. There's more competition because short sales are a little more accessible to regular buyers than buying at a foreclosure auction. With a foreclosure auction, you're actually going to the courthouse steps and bidding on the property, and you usually have to pay cash. A lot of buyers aren't prepared to do that. With a short sale, they're listed with a real estate agent and on the surface they look like a normal resale property. I would add also that we're showing the average price of a short sale is higher than an REO, so investors can get a better deal when the property goes to REO than a short sale—part of that is a function of competition from other buyers. when trying to complete a short sale? Blomquist: One of the big obstacles is when DS: What are the biggest issues servicers face there are multiple lien holders involved or multiple outstanding loans on the property. Then the servicer is having to deal with getting approval from the first lien holder and then getting approval from that second lien holder. This can be very difficult because the second lien holder wants to get something out of the short sale as well. I think another stumbling block—and I think more that servicers are committed to devoting resources to short sales and even reaching out to homeowners and giving cash incentives to homeowners to do short sales, so I think that's a positive sign. sales in the first quarter—25 percent year-over- year—and I think we're going to see a record level of short sales in 2012. We had more than 109,000 in the first quarter, and if we continue at that pace of about 110,000 every quarter, then we will end the year with more than we've ever seen in previous years. And I think we're likely to see elevated short sales into the end of 2013 because there's still a lot of distress that the servicers need to deal with, and short sales seem to be a more favorable option to them. One thing that could spur short sales this year DS: What's your forecast for short sales? Blomquist: We saw a sharp increase in short is the expiration of the Mortgage Forgiveness Debt Relief Act of 2007, which allows homeowners who do a short sale and get their debt forgiven to not have that forgiven debt be taxed by the federal government. That's an incentive for distressed homeowners to sell this year, assuming that law does not get extended. that a short sale is a better outcome for the servicers in many cases, so I encourage them to go down the path they seem to be going down, to keep pushing short sales, giving homeowners incentives to agree to short sales, and doing whatever they can to shorten the turnaround time. The average price of a short sale is about $25,000 DS: Your final word on short sales? Blomquist: Our numbers strongly indicate this is changing—is short sales were not one of the commonly used weapons in a servicer's repertoire, so they were not accustomed to using them. The default strategy in response to a delinquent loan was not a short sale in the past, so that has required a paradigm shift. I'm hearing more and more than the average price of an REO. Of course there are some variables in there, but just on face value, they're getting $25,000 more back on a short sale than an REO, and they're going to avoid the messiness and additional costs involved with foreclosing on a property and with maintaining and managing that property. So I would encourage them to continue to push for short sales. I think that would help the market overall to recover faster. responsible for the creation of the company's U.S. foreclosure market and sales reports and is the company's resident go-to expert on foreclosure statistics and trends. Daren Blomquist is RealtyTrac's VP. He is directly

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