I have been assuming that the banks would begin leaning toward doing short sales rather than foreclosuring on the rash of properties that are delinquent. We are starting to see just that. The Federal Finance Housing Agency released a report last Friday, October 2nd. Here is a graph and statements from the report accompanied by my insights.
Here is a graph from the report that shows the increase in short sales already taking place.
“Home retention actions such as repayment plans, forbearance plans and loan modifications require borrowers to have the capacity to continue to make payments. For borrowers that no longer have the capacity or desire to retain their homes, short sales and deeds-in-lieu offer an option to foreclosure.”
Here they are saying that many people can not afford the terms of a modification or no longer ‘desire to retain their homes’.
“Short sales allow borrowers to sell their homes for less than the full payoff amount due on the mortgage and for lenders to accept such amounts. Alternatively borrowers may convey title to the home to the servicer through a deed-in-lieu of foreclosure. Short sales help to keep REO inventories down and both short sales and deeds-in-lieu help to minimize the impact of foreclosure on borrowers and neighborhoods.”
It sounds like they are seeing short sales as a good alternative to foreclosure for several reasons.
“The Enterprises (Fannie and Freddie)continued to work with servicers to streamline the process for these actions.”
They are in fact trying to make the process simpler for the homeowner, real estate agent and the bank.
“In the typical short sale process, the Enterprises delegate authority to servicers to complete short sales subject to certain guidance. Freddie Mac has delegated additional authority to servicers to complete short sales by reducing the minimum net recovery rates in the five high risk states (California, Florida, Nevada, Arizona and Michigan).”
They are starting in the states with the greatest challenges. I believe it will only be a matter of time before they give other states ‘additional authority’.
Short Sales will be plentiful and easier to close as we move forward. Make sure you take adequate training in order to generate business by helping these homeowners.
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