Treasury Department Launches New Short Sale Program | Real Estate Shortsale Training
The Treasury Department announced this month that it is close to finalizing a widened incentive program to entice lenders and servicers to rely more on short sales as an alternative to foreclosure. What does this mean to Realtors? Simple, as we have been suggesting for years (and years) Short Sales ARE the must-have skill for this market. In many markets Short Sales (and REOs) are the market……..
Great article from DSNews.com
“Presumably, the Treasury is trying to help facilitate a transaction that will result in less loss to the lender than in the case of a foreclosure,” the California-based John Burns Real Estate Consulting said in a recent research note that reacted to the news.
That program – part of an initiative unveiled in May – expands on the Obama administration’s Home Affordable Modification Program, which has had a mixed record in mitigating housing losses in the U.S. economic downturn. Of the scores of troubled homeowners eligible for loan modifications under the program, only 12 percent have received refinances, according to Treasury figures.
Scant modifications have contributed to an avalanche of foreclosure filings, unleashing a flow of repossessed housing in “shadow inventories” – a property glut that could drive home prices down and threaten the market’s recent modest gains. As DS News previously reported, some analysts estimate that shadow inventory could rise as high as 7 million units, foreshadowing a new housing crash.
That prospect – and the high costs of the foreclosure process – are two reasons government regulators are pushing short sales, in which defaulting homes are sold for less than the outstanding mortgage balance. Because the homes are sold for what the market will bear, the new owner is less likely to get “underwater,” owing more than the mortgage is worth. That’s a key predictor of a borrower’s likelihood to default.
“What they are trying to do is move some of these foreclosures in the pipeline, and bring them to a resolution before (foreclosure) happens,” Lisa Marquis Jackson of the California-based John Burns Real Estate Consulting told Reuters this week. “Twelve percent of these being modified isn’t enough to clean these up.”
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Under the upcoming Treasury plan, as much as $10 billion of government funds dedicated for loan modifications will be used to give lenders catch-up payments, to assuage their fears that property values could continue to fall.
The payments still have to be worked out, but one Treasury proposal has been to offer lenders $1,000 for going along with a short sale, and the same amount for deed-in-lieu transactions with similar results.Borrowers also would be in line for incentives – possibly $1,500 in closing fees – for agreeing to a short sale or deed-in-lieu. Second lien holders could receive nearly as much – $1,000 – for signing away any claims in those sales, the Treasury said.
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I find it unbelievable that the Gov.(we all know how fast they work)can work with the current attitude of Banks(we all know how how bad that is)and accomplish anything for quite awhile.
Another useless giveaway to the banks. In response to the comment above about the government’s inability to work with the banks, with all due respect, every indication is that the government is working FOR the banks. Even the popular press is referring to them as Government Sachs.
Consider the following:
1) Of the 700 million in bailout funds, none has been accounted for and a mere 10% has been paid back, primarily to avoid compensation restrictions.
2) Goldman, Sachs has set aside 11.5 billion for bonuses this year.
3) In the one year since the illegal bailout of Bear, Sterns by doing an end run around federal law and using J.P. Morgan as the straw man, and the subsequent failure of Lehman Bros, not ONE regulation has been put in place to prevent the same risky practices that caused the collapse of the financial markets.
Treaury bought AIG and compensated them through taxpayer backed money for their bad business decisions. We now insure their latest risky endeavors in a landscape where there are now fewer and bigger banks, i.e., “too big to fail”.
The latest endeavor, now that they’re collecting insurance on all the bad mortgages, (the real reason lenders will never go for a workout or short sale. $1000???? What a joke.)is being fronted by Goldman, Sachs and Credit Suisse.
They are setting up separate arms to purchase and securitize life insurance policies and another to bet on the markets for these bonds. (Derivatives. Starting to sound familiar?)
In short, if you think 1000 bucks is going to move a lender, then you deserve to waste your time with a short sale. If you think the banks have any interests in mind except their own greed, then you have your head in the sand.
There is now a concerted effort underway, through the elimination of usury law and bankruptcy protections, and now the slamming down of credit limits and scores in order to justify charging 30% on credit cards, to turn the American public into little more than economic slaves. That this is shortsighted, inimical to their own long term interests and the country’s, and stupid seems to little impact.
With a GDP 70% dependent on consumer spending, a real unemployment rate hovering at 20% if you count “discouraged workers” and the massive uncertainty of even the employed to meet their debt, all the media happy talk of a recovery is just smoke. Even if all other sectors came back you’re talking 30% max.
Walmart isn’t reporting sales since their April year over year same store sales were down for the first time. If people aren’t buying stuff at Walmart, they’re not buying anything. Unless of course there a government giveaway (which, note, goes straight to the banks) such as cash for clunkers.
Since most of Walmart’s stuff is made in China, that means China runs short of cash to hold together it’s conglomeration of ethnic hatreds. Witness recent reports of unrest in the Uigher region as “tip of the iceberg”.
So what? Well since China holds several billion dollars in US Treasuries, when money gets real tight they’ll start selling and when they do that, the dollar will tank and there will be a run on the bank that makes 1928 look like a tea party. Only this time the bank will be Uncle Sugar. And with no credit, look for Weimar Republic inflation.
So look at big picture folks. Nothing changes if nothing changes. Sitting around with your head in the sand waiting for the next triage program from Treasury is not going to cut it.
Sorry Tim, but you’d be better off teaching people to grow their own food.