Friday, September 19, 2008

Short sales not so easy...

Banks: No Exceptions for Short Sales

Increasingly, sellers seeking short sales are encountering a new twist.

Lenders are agreeing to let some short sales go through, but they want the home owners to sign a note promising to pay some or all of the balance due – debts that could burden borrowers for the rest of their lives.

Moody’s estimates that about 10 million home owners have negative equity, a condition known colloquially as being upside down or underwater. By next June, the forecasting company expects the total to rise to 12.7 million — a quarter of all home owners who have mortgages.

“The first wave of foreclosures involved a lot of investors who just disappeared,” says Lance Churchill of Frontline Seminars, which teaches real estate practitioners how to negotiate with lenders on short sales. “Now, home owners with jobs and assets are underwater and want to sell. The banks want as much as they can get, today or in the future, and the owners want to get away clean.”

If the lender does a short sale without extracting anything from the seller, everyone in the country who is upside down could try to wiggle out from under and banks will take a fresh wave of hits. But if the lender pushes too hard, the borrower will default, leaving the bank in worse shape.

Source: The New York Times, David Streitfeld (09/18/08)

Wednesday, September 17, 2008

Foreclosures Must be Last Resort, say Realtors®

WASHINGTON, September 17, 2008

Homeowners who are struggling to make their mortgage payments must have more options available to them to avoid foreclosure, particularly in the area of short sales, according to National Association of Realtors®' testimony before the House Financial Services Committee today.

“When people lose homes to foreclosure, our communities, the housing market and our economy all suffer,” said Ron Phipps, 2009 NAR first vice president nominee. “Expanding the use of short sales would benefit consumers, lenders and the surrounding community.”

A short sale is a transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan. The lender often receives a higher amount of the remaining loan balance than it would from the sale of the property after a foreclosure. This helps support home values in the surrounding community. Short sales also help homeowners maintain some level of credit.

“Short sales can be used to avoid foreclosures, and can be less costly than a foreclosure to the lending institution,” Phipps said. “Unfortunately, many Realtors® are increasingly encountering roadblocks that prevent troubled homeowners from taking advantage of short sales. We hear that lenders are often taking a very long time to decide whether to accept a short sale, often resulting in the loss of the home buyer and the sale, and negatively impacting the neighborhood and the community,” said Phipps.

Realtors® cite many reasons for the difficulty in completing a short sale. These include burdensome paperwork, appraisals that do not consider the sellers’ duress or number of foreclosures in the community, over-burdened loss mitigation departments, and the complications created by second mortgages.

NAR has created a working group to examine the problems and difficulties surrounding short sales and to educate its members on how to best work with their clients through this process. NAR is also reaching out to its partners in the housing and mortgage industry to encourage adoption of principles and practices to streamline the short sale process. “We are asking all lenders and their servicers to deliver a clear answer, in writing, within a reasonable timeframe,” Phipps said.

“Our nation faces significant challenges in dealing with the economic turmoil fostered by the housing market,” said Phipps. “To combat this, we must assist those families threatened with the loss of their home by using all of the tools that we have at our disposal. Short sales offer families who cannot avoid losing their home a way to repay a portion of their debt obligation while maintaining a level of dignity during the process and somewhat salvaging their credit, enabling them to perhaps someday own a home again. NAR and its members stand ready to work with Congress and other industry partners to improve and implement all foreclosure mitigation efforts.”

Thanks to for this fasinating article.