BluefoxToday blog : Washington serves up a short sale initiative

Washington serves up a short sale initiative

The Obama administration came up with a new plan that is aimed at trying to breathe some more life into the morbid real estate market. It still needs quite a bit of help from wherever it can get it. This time the focus is on short sales, and why not. Anyone - real estate agents, mortgage consultants, buyers, sellers - who has been involved in one of them, has some real life horror stories to tell.

The initiative has two parts to it. One attempts to streamline the paperwork requirements for everyone, from mortgage lenders to servicers to investors to distressed homeowners. When it gets simplified, it ought to cost less to do a short sale and potentially also get it done faster. One of the major roadblocks so far has been the slow, snail-like progress of these things, to a point where well-qualified buyers with a mortgage approval in hand just give up and put an offer on some other property.

The other is financial. Washington, or the taxpayer, is paying up to $1,000 to mortgage servicers and up to $1,500 to borrowers for a closed short sale or a deed in lieu transaction. In a deed in lieu the homeowner voluntarily transfers ownership to the mortgage firm. The program will also pay up to $1,000 to a second mortgage holder if it releases the lien to allow a short sale to proceed.

This plan could be specifically beneficial to areas that have been literally mauled by dropping prices, like Las Vegas, many California and Florida counties and Phoenix. Still, it appears that the government's success projections for it are quite high. The incentives simply aren't that impressive. What it might do is give the nation a feeling that Washington is indeed on top of things and tries its best to solve problems. In short, offer a psychological boost.

The real difference will come when the banking establishment comes to realize that it just might be in their best interest to do short sales. And do them in a timely manner and based on realistic decision-making.

 

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Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst 

www.BluefoxToday.com - syndicated mortgage, housing and property management blog

eskokiuru@gmail.com
My cell: 702-499-1006

Comment balloon 8 commentsEsko Kiuru • May 15 2009 05:38PM

Comments

Esko,

I could not agree more.  I am, quite frankly, tired of the government trying to offer a psychological boost.  the government simply cannot solve all of the problems we have, nor should anyone expect it.  The way we have become as a nation reminds me of a child who expects a gift. 

Posted by Sarah Eubanks, Preferred Oregon Loan Consultant & Notary Public (Hill Valley Financial Services) over 9 years ago

Esko, I agree with Sarah, and this offer isn't going to motivate anyone in my opinion to do anything different.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 9 years ago

I don't know how beneficial the $1K will be to the junior lienholder who may be a cash out in an insurance pool.  We shall see and I shall remain optimistic!

Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) over 9 years ago

The previous initiatives have not done much. FHA Secure, Hope for Homeowners and Make Affordable. Have not taken time to study the new changes yet. Getting phone calls though. I hope it helps. And I hope banks can start acting in their own interests to modify loans on realistic terms.

The $1000 incentive seems modest to me. But it actually should not require a federal monetary incentive at all.

Richard

Posted by Richard Byron Smith, NMLS #184479, Mortgage Loan Officer (Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289) over 9 years ago

Sarah,

Your analogy is pretty good.

Posted by Esko Kiuru over 9 years ago

George,

It won't make much of a difference, I agree.

Posted by Esko Kiuru over 9 years ago

Renee,

That $1K is a head scratcher.

Posted by Esko Kiuru over 9 years ago

Richard,

Looks like more PR.

Posted by Esko Kiuru over 9 years ago

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