Over the past year, the mortgage risk analysis firm Clayton Holdings says it has witnessed an overall increase in short sale activity. Because of the growing emphasis on keeping borrowers out of foreclosure, servicers are becoming more inclined to employ alternative loss mitigation strategies. And Clayton says the added benefit to servicers is that loss severities for properties sold through short sale are 13 percent lower than loss severities for REO sales. The analysts at Clayton Holdings examined performance indicators across nine servicers’ internal proprietary short sale programs, from October 2009 to March 2010. In addition, the data showed that short sales cost bondholders about half the amount in fees and advances as REO sales, saving roughly $16,000 per sale. Clayton says servicers with the lowest loss severities for short sales employ a variety of strategies including outsourcing, utilizing dedicated short sale teams, working directly with local broker networks, and setting list prices based on historical and geographical REO net proceeds.
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