MiamiRealEstateKing

Open Letter to Obama and Congress

In bank-owned properties, Buyers, credit, Distressed Sales, First Time Sellers, First-Time Buyer, florida, forclosure, foreclosure, foreclosure moratorium, government, Home Buyer, home sellers, homeowner, Industry trends, Investing, Investor, IRS, lenders, Loan Program, Market Report, miami, miami beach, Miami-Dade County, mortgage, NAR, National, new rules, Obama, real estate, REO, Sellers, Short Sales, South Beach, Wenceslao on October 15, 2010 at 11:08 am

With our economy draging (in spite of the recession being over according to “experts”), it is more important than ever to find common ground, leave politics aside, get comfortable, get friendly and come together to find answers, compromises and solutions.

The recent foreclosure fiasco is absolutely appalling. The government and oversight entities, failed; banks and investment houses, failed; borrowers failed and everyone in between, failed; while those who were never even interested and stayed in the sidelines,  are all paying for it.

Some title insurers are already issuing statements refusing to insure recently litigated foreclosure properties.

If we want to see this country come out of the ashes and be the beacon of financial opportunity for everyone again, we need to start coming up with ways to incentivise certain bahaviour and dis-incentivise other.

For instance…for prices to begin to stabilize, even increase, real estate needs to improve. For this to happen, we all agree that jobs must improve.

Looking at the stabilization of real estate, there are certain actions that can be taken with government policy/legislation that will motivate lenders to act in a way that will, in my view, improve market conditions.

The now on-going foreclosure fiasco, has investors/first-time buyers in the sidelines or competing for less properties. An unintended consequence of this may be that prices may begin to rise as buyers/investors compete over remaining inventories, raising the bottom to new highs during this period.

Temporarily, this may also drive investors across the proverbial fence if they insist in avoiding Short Sales and feel that they don’t want to compete at higher prices for the REO inventory now in play.

The higher prices go, the more diluted their returns can be if they feel that the increases are still unsustainable until the employment/ tax situation is sorted.

Lenders must be given a choice to either continue to pay more attention to the REO area of their business, rather than to actually begin to pay attention to short sales and to divert attention and resources that lead to the settlement and conclusion of these, less costly deals.

To continue to ignore this cheaper, friendlier and still competitive alternative that helps save money in legal and other REO related expenses and legal responsibilities and liabilities, while helping to stabilize neighborhoods further, would be a shame.

Worst still…for the government to continue to incentivise rather than dis-incentivise lenders to take the REO route with pain – pleasure oriented programs that help lenders “choose” to continue rather than to abandon the REO alternative (unless absolutely necessary), in favor of the short sale route, would be aweful.

Leadership, starts with our government and the policies they create on behalf of and to help the citizens they represent. If the policies implemented create an environment where sellers can get their property sold with dignity, while keeping a gleam of hope for some future chance of home ownership again, then we are helping multiply the blessings in the future.

Otherwise, foreclosed home owners loose their chance of buying again while required to answer whether they’ve ever had a property foreclosed on or gave it back to the bank in lieu of.  Lenders in the future will be reluctant to lend to these folks.

To create policy that “overlooks” the foreclosure / character side of the mortgage application process in the future as a patch to address the needs of these borrowers 10 years from now, will be in that future, a hindrance to good lending practices. Instead, those borrowers should be allowed to sell with dignity today so they can perhaps buy again tomorrow.

Diverting resources and creating policy that “encourages” lenders to make a deal in a short sale rather than foreclose, will help stabilize prices, will help buyers get into good properties, and will help those outgoing homeowners get their act together so they can consider buying again in 3 to 5 years.

In the meantime, investors will consider buying short sales (once expediently processed), so they can enjoy rental income and then sell to future home owners when things improve, or continue to repair and resell to end-users and other investors as they have. Again, only if they can avoid the pain of the current short sale process.

I’m not coming up with anything that hasn’t been thought of. However, it is time for simple, sensible leadership, NOW.

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OPINIONS WELCOMED

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