The NY Times is reporting on a new Obama initiative to create a financial incentive for banks and home sellers alike to do short sales. A few highlights from the article:
•Program starts April 5, 2010
•Lenders will be "compelled" to accept short sales. We'll see about that.
•The administration wants to streamline the process. We'll see about that too.
•Financial incentives are $1,500 to the home seller, $1,000 to the lender, and $1,000 to a subordinate lender.
•Agents will be used to valuate the properties, but lenders will not be forced to accept offers beneath the agent valuation.
That last point is the rub: BPOs, or broker price opinions, are inconsistent and often unreliable. I do them, and I do not accept BPOs outside of a very small geographic footprint; however, many BPO agents are from far away and do robotic, formulaic, price per square foot hatchet jobs which do not accurately reflect market conditions. Once this happens, a short sale can be set back 6 months (yes, 6 months) or derailed completely. All because some guy from 50 miles away didn't care to do his homework for the $45 fee.
The piece details another thing which I have long believed: lender are skeptical about short sales. A number of quotes detail suspicion of fraud and that is unfortunate. In the short sales I broker, I see nothing but earnest buyers and sellers. We never sell to investors. I have never sold anyone a home and then done a short sale on their old place (strategic default). Banks are engaging in "prevent defense" with this mentality. You throw the baby out with the bath water when you assume fraud at the expense of people who are seeking relief in good faith.
We'll see going forward if this works. The worst thing about short sales is the abhorrent length of time and ridiculous red tape they consume. If the administration can indeed shorten and streamline the process, I'll be the worst to give them credit. This much is true: something has to be done, because too many good people are suffering.
Monday, March 29, 2010
Thursday, March 25, 2010
Tuesday, March 23, 2010
First-time homebuyer's tax credit extended for second time
California lawmakers have voted to extend a $10,000 tax credit for first-time homebuyers.
The credit will apply to first-time buyers who purchase new or existing homes between May 1 and Dec. 31 of this year. It is for 5 percent of the purchase price, or up to $10,000. The bill received bipartisan support in the Assembly and Senate on Monday and will be sent to Gov. Arnold Schwarzenegger.
The governor, who proposed the extended tax credit as part of his job-creation initiative, is expected to sign the bill.
California recently passed a tax break that capped the total credit available at $100 million on new homes purchased between March 1, 2009, and March 1, 2010.
The new bill increases that cap to $200 million and applies to new and existing home.
http://sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/03/22/state/n181320D40.DTL
The credit will apply to first-time buyers who purchase new or existing homes between May 1 and Dec. 31 of this year. It is for 5 percent of the purchase price, or up to $10,000. The bill received bipartisan support in the Assembly and Senate on Monday and will be sent to Gov. Arnold Schwarzenegger.
The governor, who proposed the extended tax credit as part of his job-creation initiative, is expected to sign the bill.
California recently passed a tax break that capped the total credit available at $100 million on new homes purchased between March 1, 2009, and March 1, 2010.
The new bill increases that cap to $200 million and applies to new and existing home.
http://sfgate.com/cgi-bin/article.cgi?f=/n/a/2010/03/22/state/n181320D40.DTL
Sunday, March 14, 2010
Obama's Short Sale Program Unfolds April 5th
The Obama Administration’s new short sale plan, which begins April 5, calls for banks to agree to not pursue borrowers for any deficiency judgments after a short sale, requires second lien holders to accept a maximum of $3000 to settle their debt, allots $1000 to mortgage servicers for a successful short sale, and allows for up to $1,500 in “relocation” assistance to borrowers.
The plan – Home Affordable Foreclosure Alternatives, or HAFA – is for borrowers who qualify for or have participated in the Home Affordable Modification Program, or HAMP, but have not been able to make their new reduced mortgage payments through the trial period. It is also for any borrower who has tried to modify their loan through HAMP and now requests a short sale in order to avoid foreclosure.
The program calls for banks to decide what they are willing to take $ wise in the short sale before the property goes on the market, so that the buyer, real estate broker and seller know what price the property needs to sell for in order for the bank to approve the short sale. It also requires lenders and servicers to use uniform documentation and short sale terms, prevents them from reducing the real estate agent’s commissions in a short sale and greatly expedites the lender’s short sale approval process to ten business days after receipt of an offer.
HAFA also allows lenders to offer a deed in lieu of foreclosure to borrowers with government insured loans without requiring borrowers to first put the property on the market for 90 days, which is the typical protocol for a deed in lieu of foreclosure.
With all of this said, the glaring, overwhelming problem with HAFA, like all government programs to date geared toward preventing foreclosures, (starting with the Bush Administration’s Housing Economic Recovery Act), is that bank participation will be voluntary and on the individual lender’s terms.
HAMP, which set out to help 3.4 million borrowers, to date has modified less than 120,000 borrowers’ loans, and even for the loans that have been modified, the lasting impact is questionable.
The good news with short sales is that, at least in my experience thus far in 2010, the nation’s lenders, simply by virtue of the fact that they have had the past 3 years to practice, are starting to move faster on short sales and issue approvals with less stringent qualifying criteria. This means that, without regard to government programs, the average homeowner has a better chance doing a successful short sale than ever before.
The plan – Home Affordable Foreclosure Alternatives, or HAFA – is for borrowers who qualify for or have participated in the Home Affordable Modification Program, or HAMP, but have not been able to make their new reduced mortgage payments through the trial period. It is also for any borrower who has tried to modify their loan through HAMP and now requests a short sale in order to avoid foreclosure.
The program calls for banks to decide what they are willing to take $ wise in the short sale before the property goes on the market, so that the buyer, real estate broker and seller know what price the property needs to sell for in order for the bank to approve the short sale. It also requires lenders and servicers to use uniform documentation and short sale terms, prevents them from reducing the real estate agent’s commissions in a short sale and greatly expedites the lender’s short sale approval process to ten business days after receipt of an offer.
HAFA also allows lenders to offer a deed in lieu of foreclosure to borrowers with government insured loans without requiring borrowers to first put the property on the market for 90 days, which is the typical protocol for a deed in lieu of foreclosure.
With all of this said, the glaring, overwhelming problem with HAFA, like all government programs to date geared toward preventing foreclosures, (starting with the Bush Administration’s Housing Economic Recovery Act), is that bank participation will be voluntary and on the individual lender’s terms.
HAMP, which set out to help 3.4 million borrowers, to date has modified less than 120,000 borrowers’ loans, and even for the loans that have been modified, the lasting impact is questionable.
The good news with short sales is that, at least in my experience thus far in 2010, the nation’s lenders, simply by virtue of the fact that they have had the past 3 years to practice, are starting to move faster on short sales and issue approvals with less stringent qualifying criteria. This means that, without regard to government programs, the average homeowner has a better chance doing a successful short sale than ever before.
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