Surge in short sale requests unlikely to impact housing market
Although short sales are likely to increase in 2010, the jump in these transactions is unlikely to have any real impact on the housing market, according to a new study by Housing Predictor. While more at-risk homeowners are turning to short sales as an alternative to foreclosure, Housing Predictor says the small number of short sales that are actually approved by banks represent less than 1 percent of all homes facing foreclosure. In the first half of 2009, only 40,000 short sales were completed, according to the most recent data available from the Office of the Comptroller of Currency shows.In addition, Housing Predictor said only an estimated 8 to 12 percent of all homeowners who request short sales accomplish a completed transaction. Because lenders only write off short sales as a loss when a property is sold, this small percentage of completed transactions leaves a gaping hole in the troubled banking industry's problem with short sales.

Source Real Trends

FHA to provide early relief to struggling homeowner

FHA to provide early relief to struggling homeowners

In an announcement Friday, HUD said homeowners with mortgages insured by the Federal Housing Administration (FHA) who are experiencing financial hardship are now eligible for loss mitigation assistance before they fall behind on their mortgage payments.Previously, these homeowners were not eligible for such assistance until after they had missed payments. But the Helping Families Save Their Home Act of 2009 signed into law by President Obama expanded FHA's authority to use its loss mitigation tools for borrowers facing "imminent default." FHA issued guidance Friday to its loan servicers on how to assist these homeowners before they default.According to FHA Commissioner David Stevens, FHA has always required lenders to establish early contact with delinquent borrowers to discuss the reason for missing a payment and to evaluate reinstatement options. But now, he says, servicers will have additional options for those homeowners who seek help before they go delinquent, increasing the likelihood that the borrower will be able to retain their home.Effective immediately, the loss mitigation options of forbearance and FHA's Home Affordable Modification Program may be used to assist borrowers facing imminent default. FHA defines a "borrower facing imminent default" to be one who is current or less than 30 days past due on their mortgage obligation, and who is experiencing a significant reduction in income or some other hardship that will prevent them from making the next required payment.Under the agency's forbearance program, the loan servicer can agree to postpone, reduce, or suspend payments due on a loan for a limited and specific time period. FHA-HAMP allows qualified FHA-insured borrowers to reduce their monthly mortgage payment to an affordable level by permanently reducing the payment through the use of a partial claim combined with a loan modification. The partial claim defers the repayment of a portion of the mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. The remaining balance is then modified through re-amortization and in some cases, an interest rate reduction.The borrower must be able to document the cause of the imminent default, such as unemployment or reduced pay, or a change in household financial circumstances such as a death in the family or serious illness. FHA said loan servicers are required to document the basis for their determination that a payment default is imminent and retain all documentation used to reach that conclusion. The servicer's documentation must also include information on the borrower's financial condition.Source: Carrie Bay, DSNews.com

2010 is Here

2010 is HERE………… Is it 20-10 or 2,010?

Coming into 2010, there are many people trying to decipher all the data that is being reported regarding the housing industry. Due to the information highway, we have and use and some times abuse, data is being thrown at us at a high rate. The main goal is to try to bring clarity to a market that has been clouded with confusion for the last Three to four years.

We must not allow the truth to overshadow the facts. What do I mean by that? Let me give you an example. The housing market is better than it was, that is a fact.
But the truth is that home prices in many areas (NOT ALL) are still falling and will continue to fall for a period of time.
Many people except when they hear that the market is doing better that implies we are back to 2005-2007. News Flash….. That is not the case and will not be the case for many years. Prices in many markets are being adjusted. For example, a wise Realtor/Manager told me about equity and people saying that they lost value of their home. That is a misconception, they got their equity early (Prepaid).

Prices must still be adjusted in order for buyers to be able to afford the home. Proof of that is that the government is still subsidizing home purchases by artificially keeping interest rates low and offering tax credits to both first-time and move-up buyers. The good news is that those programs are creating a market for people looking to sell their home now. The bad news is that they will not last forever. The question that begs to be answered is what happens when interest rates rise (the government program that has kept them low ends on March 30) and the tax credit expires (April 30)? It is my belief that, when these inducements fade, so will demand. What will happen in June is the real question, what will banks and the governments do to keep this market moving.

Pricing has always been about supply and demand. The current housing market is no different.

If you are considering selling your house, put it on the market NOW to take advantage of the increased demand before the aforementioned government incentives that created it disappear. And please don’t wait for the distressed properties to come to market.

Edwin Gerace

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Snap Shot look at Short Sales

There is some great issues with banks and learning the systems of "Short Sales" but over the last year. The banks have not been willing to work with the consumers. The banks are not willing to be timely with the getting information to the new buyers. The banks are not willing to work with in a timely manor with the sellers.

Studies have shown that it costs the bank more money if a property was foreclosed upon than if they accepted a 'short sale'. For homeowners, a 'short sale' makes much more sense for several reasons:
1- There is a much higher chance that the deficiency judgment could be negotiated in a short sale versus a foreclosure.
2- A short sale would have less of a negative impact on the homeowner's credit rating.
3- The homeowner would have at least some control over the timing of their relocation to new living arrangements.
4- A 'short sale' would allow the homeowner to leave with dignity.
5- It does not leave a house vacant for a year or more and bring other bank owned homes value down due to condition of subject property.
6- And Finally it just makes sense ( Banks don’t get it)

In the past, the banks used to process the loan (take the application, put together the file, etc.), lend you the money, and service the loan (send the bills, make collection calls, follow-up, etc.).

Over the last eight to ten years, the lending of mortgage money has shifted. First Wall Street and then the federal government became the primary lender in the mortgage sector. But, neither Wall Street nor the government had any interest in processing or servicing the mortgage. Mortgage companies continued to process the loans, but a new industry was created to fill the need for the servicing of these loans. So now, a separate and independent entity is servicing a tremendous portion of existing mortgages.

Just ten years ago, 37.4 percent of all mortgage loans were securitized (thus requiring a servicing company). Today, that number is 79.3 percent. Servicing companies actually collected more fees for a foreclosure than they did for a 'short sale'. Actually, the servicing company would lose money if they did a 'short sale'.

The federal government realizing that modifications were not the answer and banks realizing that the foreclosure process was too expensive, have agreed to change the fee structure to make it more profitable for the servicing companies to lean toward 'short sales'

Now knowing that information the process for short sales over the last 6 months to a year have become easier on everyone with one exception. While the process is easier, the volume has increased to the point that customer service has been thrown out the window and time of the essence is not spoken of.

My advice:
1- If you are in the need of a short sale, contact someone locally to help you through the process ( Loss Mitigation Specialist or an attorney). I can recommend someone to you if you need that assistance.

2- If you are interested in purchasing a Short Sale home, understand the process and understand it takes time and 85% of the time the delays are not the agents, or sellers fault. However, work with an agent that has done these type of transaction before. I can recommend someone to you if you need that assistance.

Pending Sales of U.S. Existing Homes Dropped 16% in November - Bloomberg.com

Pending Sales of U.S. Existing Homes Dropped 16% in November - Bloomberg.com