MiamiRealEstateKing

New Rules for Speedy Short Sales

In arm, Distressed Sales, First-Time Buyer, florida, forclosure, foreclosure, government, HAFA, HAMP, home sellers, lenders, Loan Originator, loan reset, mediation, miami, miami beach, modification, mortgage, option-arm, real estate, Sellers, Short Sales, Treasury on January 12, 2010 at 8:10 pm

According to an article recently posted in the Sun-Sentinel in Broward county, Florida and written by Paul Owers titled: Short sale rules could speed lender decisions, there are a number of new rules being forced on to lenders and investors alike to help speed up the short sale process.  Among them:

  • lenders will have a 10-day limit to respond to offers
  • sellers to receive $1,500 moving allowances
  • the sellers will not be on the hook for repayment of any debt
  • lenders will get $1,000 to cover administrative and processing costs
  • investors owning the mortgages will receive a maximum $1,000 for allowing up to $3,000 in short sale proceeds to be distributed to less senior lenders

These are welcomed rules.

“The rules do not specifically apply to loans guaranteed by Fannie Mae or Freddie Mac, which represent about half of all U.S. mortgage debt. The two government-run mortgage companies are working to finalize their own guidelines.” according to the article in the Sun-Sentinel. “The Treasury plan…must be implemented by lenders no later than April (2010).”

Even when presenting lenders with great offers, the bureaucracy behind the approval of a short sale and blame-game pointing to insurers and investors behind the loans for the long delays is really getting old.

Buyers therefore find themselves scrambling to find the right property and hitting a wall at each turn. If they pursue REO listings, they find themselves competing with cash buyers/investors and lenders giving these buyers the preference.

First-time buyers are bid-ed out of this market for the most part.

When they then turn to short sales, the lack of communication and unnecessary delays wears them down. Some opt for making offers on multiple properties in the hope that one of them will stick. In the end, many just call it quits leaving agents, lenders and everyone up the line hanging with weeks and months of work for not.

Lastly, many non-distressed sellers own homes in less then perfect condition and expect top dollar for their property, making them off-limits for buyers (particularly, first-time buyers), who would then have to make updates, upgrades or repairs to these properties using an FHA-203k or Homepath loan.

If the purchase price is not low enough, these buyers are unable to buy the property and justify all the repairs for a final price that falls well above the after-repair value of the home in today’s market.

The government also needs to consider that all the new rules in place for GFEs, FHA and others, plus the elimination of the tax credit may actually create a similar effect as the cash4clunkers did. A dead stop in sales.

In addition, skeptics find that 2nd mortgage holders balking at the mere $3,000 they’re expected to take on their outstanding notes may still continue to stifle these efforts if their concerns are not addressed.

Overall, although something certainly must be done to help the housing market and reduce the number of foreclosures we would continue to see in 2010 and 2011 as the result of resetting option-arm loans and other fancy products that will also help stabilize prices so that additional “strategic” foreclosures are avoided from sellers just figuring it is cheaper to just walk away.

We’ll have to see if the government can actually get all parties to agree to a compromise and mitigate further damage to our already fragile economy through true programs like these and job creation.

Your comments welcomed 🙂

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