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In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave. This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions. More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done. For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year. Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed. “We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser. The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure. To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around. Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.” Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure. For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance. For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes. If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it. The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?” Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae. Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales. Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it. Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.” There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal. “You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.” Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan. “This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.” But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser. Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent. Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer. “A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.” Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”
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To avoid further clogging the already sluggish home foreclosure pipeline, some lenders have been offering cash incentives to strapped homeowners at risk of foreclosure to complete short sales and move out of their homes. Chase, for instance, has been quietly offering as much as $35,000 to homeowners who are “upside down” on their loans — meaning, they owe more than the home is currently worth. In a short sale, the lender allows the sale of the home for less than the loan amount and often relieves the borrower of any further obligation. The incentives began late last year and are available nationally, a Chase spokesman said. Why would the bank want to pay more money to a homeowner who hasn’t been keeping up with the mortgage payments? It generally wraps up the transaction much more quickly, and leaves the home in better shape for resale. “A short sale generally produces a better and faster result for the homeowner, the investor and the community than a foreclosure,” the Chase spokesman said in an e-mail. Chase has completed more than 140,000 shorts sales since the start of 2009. The program is continuing.
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Bank of America says it's making changes to its short-sale procedures that will shorten decision times on short sale offers to 20 days, down from 45 days or longer.
The new task flow in Bank of America's short-sale management platform, Equator, will enable short-sale specialists to conduct tasks like document collection, valuations and underwriting simultaneously. When buyers walk, agents will have five days instead of 14 days to submit a backup offer.
Bank of America is requiring a new third-party authorization form for short sales initiated beginning April 14.
When the changes to Equator take effect Saturday, five documents will be required to process short sales initiated with an offer:
A purchase contract including buyer's acknowledgment and disclosure, HUD-1, IRS Form 4506-T, Bank of America short-sale addendum, and Bank of America third-party authorization form.
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Short sales (where the lender agrees to accept less than the mortgage amount due on the sale of a property by a seller) have never been easy to complete. We are not suggesting that they now will be easy. However, there is mounting evidence that the banks are seriously favoring short sales over the option of foreclosure.
CitiMortgage, is paying borrowers an average $12,000 after completing a short sale this year.
Justin Rand, the senior vice president of loss mitigation at the bank, said servicers are putting more of an emphasis on streamlining the process and pursuing a short sale ahead of foreclosure.
There is no better proof that some banks prefer a short sale than the fact that they are paying bonuses to homeowners who pick that option.
Bank of America reported they completed over 95,000 short sales in 2010 which more than doubles the number in 2009. BofA also reported that they completed more short sales than it sold previously foreclosed homes every month for the last year and a half. Last month (May), BofA completed roughly 9,000 short sales compared to 7,000 foreclosures sold.
There are many advantages to a short sale over a foreclosure for the seller (they get to plan their move, there is less embarrassment with friends and neighbors, the negative impact on their future ability to purchase is much less severe). Luckily, it now seems that the banks also think it is in their best interest to pursue a short sale.
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Sales Statistics
for INDIAN RIVER County FL |
| Realist's most
recent recording date for this county is
02/20/2012 |
| Single Family Residence |
| Jan 2012 |
109 |
$130,000 |
| Jan 2011 |
124 |
$97,250 |
| Dec 2011 |
203 |
$130,000 |
| Dec 2010 |
186 |
$125,000 |
| 2012 YTD |
178 |
$125,500 |
| 2011 |
1,955 |
$119,800 |
| Condominium |
| Jan 2012 |
24 |
$173,000 |
| Jan 2011 |
32 |
$136,850 |
| Dec 2011 |
35 |
$58,000 |
| Dec 2010 |
39 |
$79,000 |
| 2012 YTD |
41 |
$115,000 |
| 2011 |
474 |
$86,100 |
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Process
Often creditors require the borrower to prove they have an economic or financial hardship preventing them from being able to pay the deficiency.
Creditors holding liens against real estate can include primary mortgages, junior lien holders—such as second mortgages, home equity lines of credit. Lenders, home owners association HOA (special assessment liens)—all of whom will need to approve individual applications for a short sale, should they be asked to take less than what is owed.
Most large creditors have special departments that evaluate borrowers' applications for short sale approval. Often creditors use pre-determined criteria for approving the borrowers and the terms of the sale of the properties. Part of this process typically includes the creditor(s) determining the current market value of the real estate by obtaining an independent evaluation of the property from an appraisall, a broker price opinion BPO. One of the most important aspects for the borrower in this process is putting together a proper real estate short sale package. The package should be well organized along with a hardship letter telling the creditor why a short sale is needed.
Depending on each creditor's policy and the type of loan, creditors may accept applications from borrowers even if the borrower is not in default with their payments. Due to the overwhelming number of defaulting borrowers due to ecession and other causes as part of the financial crisis, many creditors have become adept at processing such short sales applications; however, it can still take several months for the process from start to finish, often requiring multiple levels of approval.
Additional parties with an interest in the real estate
Some junior lien holders and other with an interest in the property may object to the amounts other lien holders are receiving. It is possible for any one lien holder to prevent a short sale by refusing to agree to negotiate a reduction in their payoff to release their lien. If a creditor has mortgage on their loan, the insurer will likely also become a third party to these negotiations as the insurance policy may be asked to pay out a claim to offset the creditor's loss. The wide array of parties, parameters and processes involved in a short sale can make it a complex and highly specialized form of debt renegotiation. Short sales can have a high risk of failure from inability to obtain agreement from all parties or they might not be approved in time to prevent a scheduled foreclosure date.
Credit Implications
A short sale negotiation resulting in a reduction of the amount a borrower owes towards a debt acts as a type of settlement or renegotiation of a borrower's debt. Should the creditor report the debt reduction to credit reporting agencies it can adversely affect a person's credit report, however the results are far better than a forclosure After a short sale, borrowers may find it difficult to obtain a new mortgage as lender's underwriting guidelines might reject lending to a borrower who has obtained a short sale in the past.
As of 2011, national and state laws and industry standards for both real estate sales and lending are in an ongoing and rapid state of change. Borrowers need to obtain up to date information from a real estate broker. Who specialize in loss mitigation and are licensed to practice in the state where the real estate is located.
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More homes went under contract in January compared to December and a year ago, according to an index released today from the National Association of Realtors that tracks pending sales of existing U.S. homes.
NAR's Pending Home Sales Index, which is based on purchase contracts signed but not yet closed, rose 8 percent from January 2011 and 2 percent from a downwardly revised 95.1 percent in December, to 97. According to revised figures, that's the highest index score since April 2010, just before the deadline for a federal homebuyer tax credit program, when the index was at 111.3.
Lawrence Yun, NAR's chief economist, said in a statement that "the trend in contract activity implies we are on track for a more meaningful sales gain this year."
"Movements in the index have been uneven, reflecting the headwinds of tight credit, but job gains, high affordability and rising rents are hopefully pushing the market into what appears to be a sustained housing recovery," Yun added.
The index typically represents about 20 percent of all existing-home transactions nationally. An index score of 100 is equal to the average level of sales contract activity in 2001, which was the first year examined by the trade group and a robust year for existing-home sales. The national index has not been above 100 since April 2010.
The index rose year over year in all four U.S. regions with the Midwest seeing the highest increase. That region saw a 10.8 percent jump, to 88.1, though the index fell 3.8 percent compared to December.
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February 24, 2012
Dear Friends,
Although Florida is still facing economic challenges, we have recently been seeing some early indicators that industries may be growing back. Several of our licensed and regulated professions, including real estate and construction, are starting to report some signs of growth, which is very exciting! I am hopeful that other businesses and professions will show similar growth and development as time goes on.
Here at DBPR, one of our goals is to ensure our rules and processes are not cumbersome for Florida’s businesses and professionals so that as our state’s economy begins to grow again, qualified individuals may get to work. We have been committed to streamlining our processes, including license applications, with a simple common sense approach. We are dedicated to doing everything we can to ensure our processes make sense and we get qualified Floridians to work. Thank you for allowing us to continue serving you!
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Existing-home sales rose in January, marking three gains in the past four months, while inventories continued to improve, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 4.3 percent to a seasonally adjusted annual rate of 4.57 million in January from a downwardly revised 4.38 million-unit pace in December and are 0.7 percent above a spike to 4.54 million in January 2011.
Lawrence Yun, NAR chief economist, said strong gains in contract activity in recent months show buyers are responding to very favorable market conditions. “The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents.”
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It is estimated that through 2012, as high a 50% of homeowners who have a mortgage on their home will owe more than the current value of their property. You are not alone. We have helped thousands of local area residents, and would like to help you. Our expert team:
ATTORNEY - TITLE COMPANY - REALTOR
We work to get you forgiven of your debt 100%, regardless of what you owe on your home.
We are NOT investors, and are not here to attempt to "steal" your house and profit from your misfortune.
Our services are ALWAYS 100% free for you. Your lender pays ALL fees and closing costs.
A short sale done properly will stop the foreclosure of your home.
You do NOT always have t be in default to work a short sale.
We are experienced, local short sale specialists that market your home and negotiate the short sale with your lender.
We will guide you through the entire process and answer any questions you havealong the way.
We operate to very strict ethical guidelines, far above theindustry standards.
CALL NOW FOR A FREE CONFIDENTIAL CONSULTATION 772-528-8418
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Florida remained the most popular U.S. property search destination among foreign house hunters during the last three months of 2011, according to a quarterly report from real estate technology and marketing company Point2.
Point2′s International Real Estate Traffic Report, which debuted in December, tracks visits from non-U.S. consumers to listings pages on the company’s public-facing property portal, Point2Homes.
During the fourth quarter. Point2Homes had an average of 800,000 U.S. listings, and international traffic accounted for 35 percent of traffic to the site.
The 10 most popular areas — nine states plus Puerto Rico — captured 84.9 percent of the site’s international traffic overall, little changed from the third quarter of 2011 and the same period a year ago.
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It is estimated that through 2012, as high as 50% of home
owners who have a mortgage on their home will owe more
than the current value of their property. While loan modifications
can offer short term solutions, unfortunately nearly all of these
home owners are unable to qualify for any debt forgiveness.
Many home owners are delaying the inevitable while cashing
out hard earned retirement accounts, using credit cards to
pay bills and borrowing money from family members to try
to keep their heads above water. True financial relief from a
short sale is all most homeowners in hardship need. We have
assembled an expert team including :
ATTORNEY - TITLE COMPANY - REALTOR
We work to get you forgiven of your debt 100%,
regardless of what you owe on your home.
You do NOT always have to be in default to work a
short sale.
We are NOT investors, and are not here to attempt to
"steal" your house and profit from your misfortune.
We are experienced, local short sale specialist that
market your home and negotiate the short sale with your lenders.
We will guide you through the entire process and
answer any questions you have along the way.
We Operate to very strict ethical guidelines, far above
the industry standards.
A short sale done properly will stop the foreclosure of
your home.
Our services are ALWAYS 100% free for you. Your
lender pays ALL fees and closing costs, period!
Call 772-528-8418
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Location Characteristics: The small town atmosphere of this east coast community makes it a stand-out and a true gem of Florida's Treasure Coast! Located close to Palm Beach, Orlando, and the Space Coast, it is a favorite place to get away from the hectic lifestyle of more metropolitan areas. (There's not a parking meter in the whole county!) Enjoy boating and fishing on the InterCoastal or strolling our Atlantic beaches. There's plenty to offer everyone, with theaters, concerts, lecture series, art shows, museums, and gardens to explore!
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Pricing and Inventory: This is an ideal time for buyers to find a Florida dream home. Inventory is plentiful throughout the state and today’s lower prices offer true bargains for purchasers at all price levels.
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Eh, Maybe not!
Yes, prices have declined - but weren’t they over inflated in the first place, rising at unbelievable leaps and bounds since the mid 90’s??
The unfortunate manipulation of the banking laws, the interaction between commercial banks and investments houses and the blind eye by Congress instead of oversight and protection of Americas’ financial interests at home and abroad set the stage. Greed and excess has run it’s course like a juggernaut, inflicting indiscriminate destruction. Many, many people have lost homes, most that didn’t qualify for home ownership in the first place and some are those that are the unfortunate victims of job loss or cutbacks because of the economy and the myriad of life changes that have a financial impact.
But there are tremendous opportunities going on as long as one is qualified. Prices have been reduced dramatically, if it is a distressed property, and the supply is plentiful.! This actually is a tremendous time to buy Real Estate, if you qualify for loans or have that magical item - CASH. Amazing how many investors do!!
There are so many Deals to be had all across the Treasure Coast.
ZangreTeam.com